[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]





             OVERSIGHT OF INCENTIVE AUCTION IMPLEMENTATION

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

                                HEARING

                               BEFORE THE

             SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 23, 2013

                               __________

                           Serial No. 113-74




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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman
RALPH M. HALL, Texas                 HENRY A. WAXMAN, California
JOE BARTON, Texas                      Ranking Member
  Chairman Emeritus                  JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               FRANK PALLONE, Jr., New Jersey
JOSEPH R. PITTS, Pennsylvania        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
TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
  Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
PHIL GINGREY, Georgia                JIM MATHESON, Utah
STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio                JOHN BARROW, Georgia
CATHY McMORRIS RODGERS, Washington   DORIS O. MATSUI, California
GREGG HARPER, Mississippi            DONNA M. CHRISTENSEN, Virgin 
LEONARD LANCE, New Jersey                Islands
BILL CASSIDY, Louisiana              KATHY CASTOR, Florida
BRETT GUTHRIE, Kentucky              JOHN P. SARBANES, Maryland
PETE OLSON, Texas                    JERRY McNERNEY, California
DAVID B. McKINLEY, West Virginia     BRUCE L. BRALEY, Iowa
CORY GARDNER, Colorado               PETER WELCH, Vermont
MIKE POMPEO, Kansas                  BEN RAY LUJAN, New Mexico
ADAM KINZINGER, Illinois             PAUL TONKO, New York
H. MORGAN GRIFFITH, Virginia
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
             Subcommittee on Communications and Technology

                          GREG WALDEN, Oregon
                                 Chairman
ROBERT E. LATTA, Ohio                ANNA G. ESHOO, California
  Vice Chairman                        Ranking Member
JOHN SHIMKUS, Illinois               MICHAEL F. DOYLE, Pennsylvania
LEE TERRY, Nebraska                  DORIS O. MATSUI, California
MIKE ROGERS, Michigan                BRUCE L. BRALEY, Iowa
MARSHA BLACKBURN, Tennessee          PETER WELCH, Vermont
STEVE SCALISE, Louisiana             BEN RAY LUJAN, New Mexico
LEONARD LANCE, New Jersey            JOHN D. DINGELL, Michigan
BRETT GUTHRIE, Kentucky              FRANK PALLONE, Jr., New Jersey
CORY GARDNER, Colorado               BOBBY L. RUSH, Illinois
MIKE POMPEO, Kansas                  DIANA DeGETTE, Colorado
ADAM KINZINGER, Illinois             JIM MATHESON, Utah
BILLY LONG, Missouri                 HENRY A. WAXMAN, California, ex 
RENEE L. ELLMERS, North Carolina         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. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................     6
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     6
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, prepared statement...................................   110

                               Witnesses

Gary Epstein, Senior Advisor and Co-Lead, Incentive Auction Task 
  Force, Federal Communications Commission.......................     8
    Prepared statement...........................................    11
    Answers to submitted questions...............................   142
Harold Feld, Senior Vice President, Public Knowledge.............    14
    Prepared statement...........................................    16
    Answers to submitted questions...............................   145
Rick Kaplan, Executive Vice President, Strategic Planning, 
  National Association of Broadcasters...........................    37
    Prepared statement...........................................    39
    Answers to submitted questions...............................   150
Preston Padden, Executive Director, Expanding Opportunities for 
  Broadcasters Coalition.........................................    55
    Prepared statement...........................................    57
    Answers to submitted questions...............................   162
Kathleen Ham, Vice President, Federal Regulatory Affairs, T-
  Mobile.........................................................    66
    Prepared statement...........................................    68
    Answers to submitted questions...............................   166
Joan Marsh, Vice President, Federal Regulatory, AT&T.............    83
    Prepared statement...........................................    85

                           Submitted Material

Letter of July 19, 2013, from coalition of Fortune 100 companies 
  to the committee, submitted by Ms. Eshoo.......................   111
Letter of July 22, 2013, from public interest groups to the 
  committee, submitted by Mr. Waxman.............................   114
Ex parte by the U.S. Department of Justice, submitted by Mr. 
  Waxman.........................................................   116
Letter of July 16, 2013, from eight committee members to the 
  Federal Communications Commission, submitted by Mr. Dingell....   140
Letter of July 22, 2013, from the Telecommunications Industry 
  Association to the subcommittee, submitted by Mr. Walden.......   142

 
             OVERSIGHT OF INCENTIVE AUCTION IMPLEMENTATION

                              ----------                              


                         TUESDAY, JULY 23, 2013

                  House of Representatives,
     Subcommittee on Communications and Technology,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:34 a.m., in 
room 2322 of the Rayburn House Office Building, Hon. Greg 
Walden (chairman of the subcommittee) presiding.
    Members present: Representatives Walden, Latta, Blackburn, 
Scalise, Lance, Guthrie, Kinzinger, Long, Ellmers, Eshoo, 
Doyle, Braley, Welch, Lujan, Dingell, and Waxman (ex officio).
    Staff present: Ray Baum, Senior Policy Advisor/Director of 
Coalitions; Sean Bonyun, Communications Director; Matt Bravo, 
Professional Staff Member; Megan Capiak, Staff Assistant; Andy 
Duberstein, Deputy Press Secretary; Kelsey Guyselman, Counsel, 
Telecom; David Redl, Counsel, Telecom; Charlotte Savercool, 
Executive Assistant, Legislative Clerk; Shawn Chang, Democratic 
Senior Counsel; Patrick Donovan, Democratic FCC Detailee; Roger 
Sherman, Democratic Chief Counsel; and Kara Van Stralen, 
Democratic Policy Analyst.

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

    Mr. Walden. I will call to order the Subcommittee on 
Communications and Technology, and welcome our witnesses for 
our hearing on ``Oversight of the Incentive Auction 
Implementation.''
    So the subcommittee meets today to continue our oversight 
of the FCC's progress in implementing the incentive auction 
legislation that Congress passed last year. As you know, a 
successful broadcast incentive auction has the potential to 
bring significant revenue from the sale of the spectrum to bear 
on our Nation's broadband spectrum crunch, unleash innovation 
for consumers, create hundreds of thousands of jobs for 
Americans, provide funding to begin the process of building out 
a nationwide interoperable public safety broadband network, and 
make significant contributions to reducing the Nation's 
deficit.
    But as with most things, the devil is in the details. We 
convened all five sitting FCC commissioners last December for a 
progress report on the implementation of the law. This was a 
first step in making sure that the Commission stays on track 
and acts within the confines of the law. In order to ensure 
that the FCC continues to follow the law, proper oversight is 
necessary.
    A successful auction will require the FCC to get two parts 
of the equation correctly: the broadcast side and the broadband 
side. Now for broadcasters, the intent of the law could not be 
more clear. For those that plan to exit the market, the FCC has 
an obligation to let the market work. I am sure the Commission 
seems to be contemplating its judgment for that of the market 
when it comes to placing a value on a broadcast license. For 
the incentive auction to be successful, broadcasters that 
participate should be assured that they will be compensated 
based on the market value of their licenses as determined by 
the auction, not based on estimates by the FCC. The auction is 
voluntary, and we should askance at FCC policies that would 
dissuade participation.
    Now for those who remain in the business of broadcasting, I 
have been equally clear what I believe is needed, and the 
statute is clear what they deserve is certainty. Broadcasters 
should be assured they will be able to remain viable following 
the auction. That means the Commission must provide the 
certainty that broadcasters in the border states will not be 
interfered with by our neighbors to the north and south. But 
beyond the statutory requirements, it means the FCC should take 
into consideration the unique challenges across the country as 
they reclaim broadcast spectrum and repack existing channels.
    For example, although ineligible to participate in the 
auction, low-powered translators play a unique role in states 
in the mountain west. The Commission should consider the 
ongoing need for translators as they conduct the repacking 
analysis.
    On the broadband side of the equation, the Commission 
should carefully consider how best to promote participation in 
the auction in a way that is consistent with the Communications 
Act.
    Ultimately, a successful auction will be dependent on both 
broadcast and broadband interest. The FCC would be wise to 
recognize that in an industry as competitive as commercial 
wireless, rarely does the industry speak with a single voice. 
That is why I am encouraged that a large portion of the 
industry and broadcasters seems to be coalescing around a band 
plan that promotes competition and maximizes auction proceeds. 
So I would like to have seen the FCC focus on these aspects in 
their recent public notice on band plans.
    Finally, I would like to talk for just a moment about the 
auction participation. Just like the broadcasters, potential 
broadband licensees should be courted as participants and not 
subjected to economic manipulations at the hands of the FCC. As 
we have learned time and again in spectrum auctions, well-
meaning FCCs have tried to place conditions on auctions in an 
effort to engineer what it deemed a pro-competitive outcome. 
Recently, some have suggested the FCC can place restrictions on 
auction participation without any adverse effect on auction 
proceeds. It would be folly at best for the FCC to think that 
it could know better than the true market-based auction the 
maximum amount the auction could raise. Carefully crafted 
auction that recognizes the value of participation and has the 
humility to let the market decide the value of spectrum will 
best serve all the goals of the legislation.
    So our witnesses today represent the many sides of this 
debate. Broadcasters that want to sell and broadcasters that 
want to broadcast, two of our Nation's four largest wireless 
providers, a representative of the public interest community, 
and the Federal Communications Commission. While our witnesses 
may not see eye-to-eye on all the issues we will discuss, I 
look forward to your testimony--I have read it--and your 
counsel as we all work together on this. I know that we share a 
desire to see a successful broadcast incentive auction. I thank 
you all for being here today.
    [The prepared statement of Mr. Walden follows:]

                 Prepared statement of Hon. Greg Walden

    The subcommittee meets today to continue our oversight of 
the FCC's progress in implementing the incentive auction 
legislation Congress passed last year. A successful broadcast 
incentive auction has the potential to bring significant 
spectrum to bear on our nation's broadband spectrum crunch, 
unleash innovation for consumers, create hundreds of thousands 
of jobs for Americans, provide funding to begin the process of 
building out a nationwide public safety broadband network, and 
make a significant contribution to reducing the deficit. But as 
with most things, the devil is in the details.
    We convened all five sitting FCC commissioners last 
December for a ``progress report'' on the implementation of the 
law. This was a first step in making sure that the commission 
stays on track and acts within the confines of the law. In 
order to ensure that the FCC continues to follow the law, 
proper oversight is necessary.
    A successful auction will require the FCC to get two parts 
of the equation right: the broadcast side and the broadband 
side.
    For broadcasters, the intent of the law couldn't be more 
clear. For those that plan to exit the market, the FCC has an 
obligation to let the market work. I am concerned that the 
commission seems to be contemplating inserting its judgment for 
that of the market when it comes to placing a value on a 
broadcast license. For the incentive auction to be successful, 
broadcasters that participate should be assured that they will 
be compensated based on the market value of their licenses--as 
determined by the auction--not based on estimates by the FCC. 
The auction is voluntary and we should look askance at FCC 
policies that would dissuade participation.
    For those that remain in the business of broadcasting, I 
have been equally clear what I believe is needed--and the 
statute is clear what they deserve--is certainty. Broadcasters 
should be assured that they will be able to remain viable 
following this auction. That means the commission must provide 
the certainty that broadcasters in the border states will not 
be interfered with by our neighbors to the north and south. But 
beyond the statutory requirements, it means the FCC should take 
into consideration the unique challenges across the country as 
they reclaim broadcast spectrum and repack existing channels. 
For example, although ineligible to participate in the auction, 
low-power translators play a unique role in states in the 
mountain west. The commission should consider the ongoing need 
for translators as they conduct their repacking analysis.
    On the broadband side of the equation, the commission 
should carefully consider how best to promote participate in 
the auction in a way that is consistent with the Communications 
Act.
    Ultimately, a successful auction will be dependent on both 
broadcast and broadband interest. The FCC would be wise to 
recognize that in an industry as competitive as commercial 
wireless, rarely does the industry speak with a single voice. 
That's why I am encouraged that a large portion of the 
industry--and broadcasters--seems to be coalescing around a 
band plan that promotes competition and maximizes auction 
proceeds. I would like to have seen the FCC focus on these 
aspects in their recent public notice on band plans.
    Finally, I would like to talk for just a moment about 
auction participation. Just like the broadcasters, potential 
broadband licensees should be courted as participants not 
subjected to economic manipulation at the hands of the FCC. As 
we have learned time and again in spectrum auctions, well-
meaning FCCs have tried to place conditions on auctions in an 
effort to engineer what it deems a ``pro-competitive outcome.'' 
Recently, some have suggested that the FCC can place 
restrictions on auction participation without any adverse 
impact on auction proceeds. Let me be clear: it would be folly 
at best for the FCC to think that it could know better than a 
true market-based auction the maximum amount the auction could 
raise. A carefully crafted auction that recognizes the value of 
participation and has the humility to let the market decide the 
value of spectrum will best serve all of the goals of the 
legislation.
    Our witnesses today represent the many sides of this 
debate. Broadcasters that want to sell and broadcasters that 
want to broadcast; two of our nation's four largest wireless 
providers; a representative of the public interest community; 
and, the Federal Communications Commission. While our witnesses 
may not see eye to eye on all of the issues we will discuss, I 
look forward to their testimony and counsel and know they share 
our desire to see a successful broadcast incentive auction.

                                #  #  #

    Mr. Walden. I would yield the balance of my time to the 
vice chair of the subcommittee, Mr. Latta.
    Mr. Latta. Well thank you, Mr. Chairman, and thank you very 
much for holding this very important hearing today.
    Spectrum has been a priority for this subcommittee over the 
past several years, and it is incumbent upon Congress to 
exercise oversight over the incentive auction. The Spectrum Act 
passed as part of the Middle Class Tax Relief and Job Creation 
Act in 2011 was landmark legislation with the authorization of 
the broadcast spectrum incentive auction. The success of this 
auction, which will be the most complicated the world has ever 
seen, is absolutely critical for bringing more spectrum to the 
market for mobile broadband as well as for funding our 
nationwide public safety broadband network.
    There is no question that success hinges on the incentive 
auction's design. I look forward to hearing from each of our 
distinguished witnesses on the incentive auction implementation 
and the benefits or consequences of the certain auction 
designs. I look forward to the testimony, and as we continue 
this very critical dialogue.
    And with that, Mr. Chairman, I yield back the remainder of 
my time.
    Mr. Walden. Gentleman yields back his time. Chair now 
recognizes the gentlelady from California, Ms. Eshoo, the 
ranking member, for 5 minutes.

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

    Ms. Eshoo. Thank you, Mr. Chairman. Good morning to all of 
my colleagues and to those that are testifying today.
    As former FCC Chairman McDowell wisely stated last year, 
the upcoming voluntary incentive auction will ``literally be 
the most complex spectrum auction in world history.'' To drive 
new investment, create jobs, and spark a new era of wireless 
broadband, we need to make sure this auction is done right the 
first time. We have to get this right.
    We all know the storyline by now. Consumer demand for 
wireless broadband continues to skyrocket. More than half of 
all Americans now own a smartphone and as the number of 
wireless devices increases, so has data consumption. Last year 
alone, mobile devices in the U.S. downloaded more than 1.4 
trillion megabits of data. That is nearly four times more 
demand than in 2010, and 2010 was not all that long ago.
    As the FCC structures its auction rules and band plan to 
meet this growth, there are two areas that deserve enhanced 
attention. First, with a rare opportunity to auction beachfront 
spectrum under 1 gigahertz, we must promote a competitive 
wireless landscape in which carriers of all sizes, both 
regional and national, have an opportunity to bid competitively 
for licensed spectrum. Today in the top 10 U.S. markets, the 
two largest wireless carriers control 86 percent of all 
beachfront spectrum below 1 gigahertz. As the Department of 
Justice observed earlier this year, an auction that protects 
and promotes a healthy, competitive wireless marketplace 
enhances consumer choice and serves the public good. Consistent 
with statute, the FCC should heed this advice by developing 
rules that promote competition and broad carrier participation.
    Second, the FCC should structure a band plan that ensures a 
nationwide block of spectrum under 1 gigahertz dedicated for 
unlicensed innovation. The economic benefits of such an 
expansion are well-documented with recent studies concluding 
that the unlicensed wireless sector contributes between $50 and 
$100 billion per year to the U.S. economy. That is with a B. 
That is not million, that is billion.
    Just this month, West Virginia University became the first 
university in the country to use TV white spaces to deliver 
wireless broadband service across the campus. Following on the 
successes of WiFi, Bluetooth, and RFID, the upcoming incentive 
auction can provide a unique opportunity to fuel a new 
generation of unlicensed technologies, supporting rural 
broadband, connected hospitals, smart grid networking, and so 
much more.
    So I thank all of the witnesses that are here today to 
share your perspectives. I look forward to your testimony that 
will support our subcommittee's ongoing oversight.
    Ms. Eshoo. I don't know--where is the clock? With that, I 
would like to yield the balance of my time to my colleague, Mr. 
Doyle.
    Mr. Doyle. I thank my friend.
    This is a critical time for the future of competition in 
the wireless marketplace. Large carriers currently hold over 80 
percent of the licenses for spectrum below 1 gigahertz. This 
spectrum provides the best in-building coverage, something that 
is crucial in urban areas, like many parts of my district in 
Pittsburgh.
    The increasing disparity in carrier spectrum assets which 
the Department of Justice and the Commission have both 
recognized, presents significant risks such as slowing 
innovation, stifling price and service competition. If we are 
going to ensure more competitive mobile services marketplace, 
the Commission must ensure that all carriers have the 
opportunity to acquire high quality spectrum to meet the 
skyrocketing demand for mobile broadband services.
    In the Spectrum Act we passed last year, we specifically 
preserved the Commission's authority to adopt and enforce rules 
concerning spectrum aggregation that promote competition. 
Holdings of lower band spectrum are already dangerously 
concentrated. I hope the FCC uses its authority to prevent 
further concentration in this upcoming incentive auction.
    With that, I yield back my time and thank my colleague and 
friend, Ms. Eshoo.
    Ms. Eshoo. Mr. Chairman, may I just submit something for 
the record? This is a letter from a broad coalition of Fortune 
100 companies, rural wireless carriers, and small businesses 
who believe every wireless carrier should have a fair 
opportunity to compete in the upcoming auction.
    Mr. Walden. Without objection.
    [The information appears at the conclusion of the hearing.]
    Ms. Eshoo. Thank you.
    Mr. Walden. Gentlelady yields back her time. Turn now to 
the vice chair of the full committee, Ms. Blackburn, from 
Tennessee, for 5 minutes.

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

    Mrs. Blackburn. Thank you, Mr. Chairman, and I want to 
thank each of you for being here. I have to tell you, we all 
have questions and we are looking forward to having your 
feedback today as we look at what we think is a pretty 
important issue, and that is the spectrum auctions. There are 
questions that are unanswered regarding both the policy and the 
process. We are hoping that we can clear up some of those. We 
think the law is clear and if we follow the law, then we are 
going to have a successful auction. And if we don't, then I 
think that we are pretty much guaranteed to fail.
    It is important for us to keep in mind also that going 
through the spectrum auction process, this is not a science 
fair project, and we want to make certain that we do our due 
diligence. This is going to be a complicated process and it 
doesn't mean the FCC should exclude participants in order to 
show favoritism to certain telecommunication competitors. 
Gerrymandering the auctions, particularly the below 1 gigahertz 
level, to give regulatory favor to some competitors at the 
expense of those who have earned their success puts all of the 
work that we have done up to this point at risk. It violates 
the law and it also threatens our ability to stand up the 
public safety network, to provide revenue for deficit 
reduction, and to find a repacking solution.
    So we are going to have a lot of questions for you today. 
Again, I thank you all for being here, and we look forward to 
proceeding in an orderly manner.
    And I yield back--I will yield time to Mr. Long, Ms. 
Ellmers, whomever is----
    Mr. Walden. If either of you seek time? If not----
    Mrs. Blackburn. If no one is seeking time, I will yield 
back.
    Mr. Walden. Yield back. Chair now recognizes former 
chairman of the committee, the gentleman from California, Mr. 
Waxman, for 5 minutes.

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

    Mr. Waxman. Thank you, Mr. Chairman.
    Today we continue our oversight of the FCC's implementation 
of the public safety inspector MACT that Congress passed last 
year with strong bipartisan support, and I want to thank 
Chairman Walden for working with us to assemble an outstanding 
panel of witnesses. We are delighted to have you all here.
    We will hear divergent views today on how the auction 
should be implemented, but equally strong, we will hear 
agreement that we have a need to make this groundbreaking 
auction a success.
    When Congress enacted this landmark legislation, we knew 
that implementation would be challenging. The FCC quickly 
retained a group of world class experts to help design the 
complex spectrum auction, and the FCC staff immediately started 
working around the clock to get this right. I want to thank the 
dozens of FCC staffers who have worked so hard to address the 
challenges posed by this auction.
    In my view, the success of the auction will be measured by 
how well we meet the goals laid out by the law. Congress 
enacted the law with multiple goals in mind: to help relieve 
the spectrum crunch, and to meet the exploding demand of 
wireless data, to raise revenue, to fund multiple public 
priorities, including the creation of the broadband network for 
first responders, or FirstNet, to promote competition in the 
wireless marketplace, and to spur continued innovation such as 
the creation of new super Wi-Fi services. The law we passed 
reflects all of these goals. To promote competition, the law 
expressly preserves the ability of the FCC to establish limits 
on spectrum aggregation where necessary to ensure competition. 
To promote innovation, the law called for the establishment of 
a nationwide guard bands that can be used for unlicensed use.
    Not surprisingly, some parties are now engaged in 
revisionist history, suggesting that the FCC has less authority 
than the statute provides. Others are trying to erect straw 
men, arguing that proponents of a competitive auction want to 
exclude AT&T, Inspect, and Verizon from bidding. No party that 
I am aware of is urging the FCC to exclude the biggest wireless 
companies from participating in the auction. In fact, my own 
view is that both companies should be able to compete in the 
auction. But it makes no sense to allow the two biggest 
companies with an already dominant market position to acquire 
all of this high quality beachfront spectrum. The Justice 
Department wrote the FCC earlier this year to emphasize how 
important it is for competition and consumers that this low 
band spectrum not be dominated by the two big carriers. This 
expert views from the antitrust division deserve careful 
consideration.
    Others have challenged the creation of guard bands, but 
guard bands are important to enhance the value of the spectrum 
being auctioned, and to create spectrum that can be used for 
the next generation of Wi-Fi services. The FCC's job will not 
be easy, but the goals of the statute are the right ones and 
they are all achievable. With carefully designed rules, the FCC 
can make new spectrum available to wireless carriers, raise the 
revenue needed for FirstNet, and promote competition and 
innovation. Our job should be to resist the importuning of 
special interests and help the FCC make this groundbreaking 
auction an historic success.
    I look forward to the testimony of our distinguished 
witnesses, and I would like to ask unanimous consent to put two 
documents into the record. One is a letter from public interest 
groups, Public Knowledge, The New America Foundation, the 
National Hispanic Media Coalition, Free Press of the Writers 
Guild of America, in support of pro-consumer limitations on 
spectrum concentration as part of the auction of the 600 
megahertz band by the FCC.
    Mr. Walden. Without objection.
    [The information appears at the conclusion of the hearing.]
    Mr. Waxman. And the second is to enter into the record an 
ex parte by the U.S. Department of Justice concluding that the 
rules for the 600 megahertz auctions are necessary to ensure 
competition in the wireless market.
    Mr. Walden. Without objection.
    [The information appears at the conclusion of the hearing.]
    Mr. Waxman. Thank you, Mr. Chairman. I yield back the 
balance of my time.
    Mr. Walden. Gentleman yields back the balance of his time. 
Now we will turn to our distinguished panel of witnesses who 
have agreed to provide us with great testimony and counsel 
today. We appreciate you all being here.
    We will start with Gary Epstein, who is the Senior Advisor 
and Co-Lead of the Incentive Auction Task Force, the Federal 
Communications Commission, the man who has the biggest weight 
on his shoulder to do it all, and do it all right, make it all 
work. Mr. Epstein, thanks for the work you are doing for the 
country at the FCC. We look forward to your comments today, 
sir.

    STATEMENTS OF GARY EPSTEIN, SENIOR ADVISOR AND CO-LEAD, 
     INCENTIVE AUCTION TASK FORCE, FEDERAL COMMUNICATIONS 
    COMMISSION; HAROLD FELD, SENIOR VICE PRESIDENT, PUBLIC 
  KNOWLEDGE; RICK KAPLAN, EXECUTIVE VICE PRESIDENT, STRATEGIC 
PLANNING, NATIONAL ASSOCIATION OF BROADCASTERS; PRESTON PADDEN, 
 EXECUTIVE DIRECTOR, EXPANDING OPPORTUNITIES FOR BROADCASTERS 
  COALITION; KATHLEEN HAM, VICE PRESIDENT, FEDERAL REGULATORY 
  AFFAIRS, T-MOBILE; AND JOAN MARSH, VICE PRESIDENT, FEDERAL 
                        REGULATORY, AT&T

                   STATEMENT OF GARY EPSTEIN

    Mr. Epstein. Thank you very much. Good morning, Chairman 
Walden and Ranking Member Eshoo, and members of the 
subcommittee. My name is Gary Epstein. I am the Senior Advisor 
and Chair of the Federal Communications Commission Incentive 
Auction Task Force. Thank you for the opportunity to discuss 
the Commission's efforts to carry out Congress' statutory 
direction in designing and implementing the broadcast 
television spectrum incentive auction.
    In our effort to design and implement the incentive 
auction, the Commission is guided by four primary public 
interest objectives. One, relieving the spectrum crunch by 
creating a market-based process for repurposing the maximum 
amount of UHF spectrum for licensed and unlicensed flexible use 
to address the expected growth in mobile data usage, which is 
predicted to grow by a factor of nine by 2017. Two, fulfilling 
our statutory obligations and congressional objectives that 
include reimbursing repack broadcasters, funding FirstNet, and 
deficit reduction. Three, providing a unique financial 
opportunity for participating broadcasters while preserving our 
healthy broadcast services for those who choose not to 
contribute their spectrum. And four, promoting the innovation 
in a vibrant mobile market.
    As we pursue these objectives, we are focused on both the 
engineering and economics issues, and are drawing on the 
expertise of the world's leading economists, auction design 
experts, and engineers, both inside and outside the agency. We 
are engaging with all interested parties in an open and 
transparent process in which we will learn from the robust 
public record we are building, aim for simplicity, and adjust 
our proposals as necessary to ensure that the auction succeeds.
    With respect to process, it is also important to remember 
that we are in the middle of an open proceeding and the 
Commission has made no final determinations. The staff's role 
in the incentive auction proceeding, under the direction of the 
Commission, is to conduct as comprehensive and exhaustive an 
examination of the full range of policy options as practicable 
in order to best advise the Commission. Ultimately, within the 
bounds of the statute, it is the Commission that will determine 
the design of the incentive auction.
    The Commission has moved swiftly since Congress passed the 
Spectrum Act. A guiding principle has been to ``get it done on 
time and to get it done right.'' Under Acting Chairwoman 
Clyburn, the staff has continued our steady progress toward a 
2013 report and order and a 2014 auction.
    In the first 6 months after the Act was passed, the 
Commission quickly formed a cross-agency task force, retained 
auction design experts, adopted a channel sharing order, and 
officially launched the proceeding by adopting a comprehensive 
and specific notice of proposed rulemaking.
    Since adopting the Notice, we have hosted several workshops 
and participated in numerous industry conferences, both to 
inform the public about the proceeding and solicit input on 
distinct incentive auction issues. To date we have had 
workshops on channel sharing, reimbursement for relocation 
costs, auction design, the band plan, and the Notice itself.
    In addition, in the interests of public engagement and an 
open, transparent and participatory process, the Commissioners 
and staff have participated in over 180 incentive auction-
related events and meetings since the enactment of the Spectrum 
Act, including numerous discussions with our colleagues in 
Canada and Mexico. Perhaps unsurprisingly, the Task Force has 
met with each of my fellow panelists numerous times to discuss 
their particular views with respect to the auction.
    Since the Notice, we have also released several public 
notices on issues we believe warranted further consideration 
and opportunity for interested parties to provide additional 
input. To date, we have received and considered over 460 
comments and reply comments to incentive auction public 
notices. Our public notices have solicited input on 
interference calculation software, band plan design, and in the 
case of a public notice we released just yesterday, the 
repacking process. Yesterday's release includes the results of 
a preliminary analysis of whether any particular television 
station could be assigned or reassigned to particular channels 
in the incentive auction repacking process, consistent with 
statutory and other requirements. Each public notice we have 
issued has proven critical to advancing the proceeding, and we 
expect that yesterday's release, which was only the first of 
several public notices we expect to issue regarding repacking, 
will allow interested parties to better understand some of our 
preliminary efforts in developing a repacking methodology and 
elicit valuable comments on our proposals.
    Finally, we are committed to an open, transparent, and 
inclusive process. On several issues it appears there is 
emerging some agreement on how to move forward. On other 
issues, stakeholders appear to be coming to general agreement 
on the surface, but there remain important differences of 
opinion in the details. And on some important topics there 
remain divergent positions. The key for the Commission is to 
continue to solicit and carefully review ideas from the 
experts, both outside and within the Commission, to enable the 
Commission to make the hard decisions based on the best 
available data and ideas. The Incentive Auction Task Force will 
make recommendations to the full Commission that we believe 
will result in an auction that will serve the public interest 
and achieve the objectives and goals Congress laid out in the 
Spectrum Act. The ideas we put forth for the Commissioners to 
consider will be based on substantial and valuable input from 
the public.
    Thank you and I look forward to your questions.
    [The prepared statement of Mr. Epstein follows:]



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    Mr. Walden. Mr. Epstein, thank you, and again, thank you 
for what you and your team are doing to try and get this right 
and get it done on time. So we appreciate that.
    Mr. Epstein. Thank you, Mr. Chairman.
    Mr. Walden. We are going to go now to the Senior Vice 
President of Public Knowledge, Mr. Harold Feld. We appreciate 
your being back before our subcommittee to testify, and we look 
forward to your comments.

                    STATEMENT OF HAROLD FELD

    Mr. Feld. Thank you very much, Chairman Walden, Ranking 
Member Eshoo. Thank you for inviting me here to testify today.
    Two years ago, I testified before this subcommittee that a 
properly structured incentive auction could be a rare public 
policy trifecta, a win-win-win that provided more licensed 
spectrum, more efficient access to unlicensed spectrum in this 
extremely useful set of frequencies. In addition to raising 
revenue for an interoperable public safety network, now called 
FirstNet, the auction of licenses in this band for mobile 
broadband could also enhance competition to the benefit of 
consumers.
    At the same time, while reallocation of a portion of the TV 
band from broadcasting to licensed wireless service would mean 
the loss of spectrum for white spaces in some areas that raise 
the possibility of creating more access in crowded urban 
markets. Through the reallocation of the spectrum and 
subsequent repacking of the remaining broadcasters, the FCC 
could create a national unlicensed band that would encourage 
developers to build new devices and offer more innovative 
services that take advantage of the unique properties of these 
frequencies.
    The last 2 years have proved both the importance of 
unlicensed access, especially in the TV bands, and the 
importance of stimulating competition on the licensed side. In 
this time period, we have seen the cable industry recognize the 
value of offering unlicensed access as a supplement for their 
broadband networks. Ad hoc unlicensed networks proved their 
value in the aftermath of Superstorm Sandy. We now talk of 
carrier grade Wi-Fi as a critical tool for the wireless 
industry. Wireless ISPs are using unlicensed spectrum, 
including TV white spaces, to bring affordable broadband to 
rural America.
    We have also seen the value of regulatory steps to promote 
competition. In 2011, the FCC imposed data roaming rules, and 
with the Department of Justice, jointly blocked the effort of 
AT&T to acquire T-Mobile. In 2012, they pushed Verizon to 
divest spectrum to competitors as part of its acquisition of 
spectrum co-licenses. As a result, we have seen more investment 
in the wireless market in the last year than we had for many 
years before. Billions of dollars of new investment float into 
the market as both T-Mobile and Sprint attracted new interest. 
These revitalized competitors have offered new equipment plans 
and service plans, and in response, AT&T and Verizon have 
redoubled their efforts to deploy 4G LTE networks as rapidly as 
possible and respond with their own new pricing plans. In 
short, competition works and needs to be preserved.
    All of this highlights the importance of getting rules for 
this incentive auction right. The Department of Justice has 
identified access to low band spectrum as critical for 
competition. This spectrum is highly valued for its propagation 
qualities, its ability to travel long distances and penetrate 
buildings and trees. Companies looking to invest in unlicensed, 
such as Comcast, Google, and Microsoft have likewise identified 
the broadcast band as critical for developing the next 
generation of unlicensed services.
    What does getting it right mean? First, it means we must 
stop creating false choices and pushing the FCC to choose 
sides. Congress passed a compromised bill that gave the FCC the 
authority to use the auction to enhance unlicensed and promote 
competition, but within limits. We should collectively embrace 
this compromise rather than refighting old battles. The 
priorities of this auction must work together, not push against 
each other and fly apart.
    Second, we need to respect the FCC staff as they work 
through this difficult process. We cannot have the transparency 
and trust we need if people unhappy with the substantive 
choices browbeat them over procedure. We should recognize that 
well-structured guard bands will both provide adequate spectrum 
for unlicensed use and increase the value of the service as a 
whole. This is not about artificially inflating guard bands to 
the point where it would undermine the license service; this is 
about being mindful to achieve all our goals. Instead of 
setting this up as a false choice where every megahertz of 
guard band is seen as lost revenue, we should recognize that 
well-structured guard bands will serve the interest of licensed 
and unlicensed users alike.
    Finally, we need to make sure that we have enough 
participation in the auction to make it worth holding. The best 
way to ensure that enough bidders to show up is what we call a 
``No Piggies Rule.'' Don't ban anyone from the auction, but 
limit the number of licenses that any one company can win. 
Opponents of a No Piggies Rule argue that we need to have AT&T 
and Verizon in the auction. That is true, but the beauty of the 
No Piggies Rule is it lets AT&T and Verizon participate; it 
just makes sure there are enough licenses to make it worthwhile 
for competitors to show up as well. An auction with only AT&T 
and Verizon will be just as much a failure as an auction that 
banned AT&T and Verizon.
    To conclude, the key to a successful incentive auction is a 
balanced approach. We get there by continuing our current 
deliberative process. We can still achieve a public policy 
trifecta, a win-win-win for mobile broadband competition and 
unlicensed access and build an interoperable public safety net 
that we all need. It would be a shame to miss this chance by 
fighting old battles instead of working together.
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. Feld follows:]



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    Mr. Walden. Mr. Feld, thank you for your testimony. We will 
now go to Mr. Rick Kaplan, who is the Executive Vice President, 
Strategic Planning, at the National Association of 
Broadcasters. Mr. Kaplan, welcome back. We look forward to your 
testimony as well.

                    STATEMENT OF RICK KAPLAN

    Mr. Kaplan. Good morning, Chairman Walden, Ranking Member 
Eshoo, and members of the subcommittee. Thank you for inviting 
me on behalf of the National Association of Broadcasters to 
testify before you today.
    NAB is committed to lending its expertise to the 
subcommittee and the FCC to ensure the successful completion of 
the world's first ever broadcast incentive auction to the 
benefit of America's consumers, the U.S. Treasury, and public 
safety. A properly run auction is also critical to the future 
of the Nation's broadcast industry.
    Now, a casual observer of today's hearing might be led to 
believe that the upcoming incentive auction is primarily a 
wireless industry issue. He or she will hear about licensed and 
unlicensed spectrum, spectrum aggregation limits, and the drive 
to maximize the amount of spectrum freed up by paying 
handsomely private equity funds and others on the fringes of 
broadcasting to relinquish spectrum. The reality, however, is 
that the industry on which this auction will have the greatest 
impact is the broadcast industry.
    To offer some perspective, according to OSTP and the 
National Economic Council, the U.S. commercial wireless 
industry will soon control more than 660 megahertz of spectrum, 
more than any other commercial enterprise, and well more than 
its counterparts in nearly every other country. This amount is 
more than double the spectrum allocated to the broadcast 
industry, and that is before the incentive auction. In fact, a 
wildly successful incentive auction will likely contribute less 
than 15 percent of new spectrum to the wireless industry's 
overall stockpile.
    By contrast, this auction will leave an indelible mark on 
the broadcast industry. Some 30 percent of the channels on 
which broadcasters operate will be gone, and we will have to 
reallocate upwards of 50 percent of the stations that remain on 
the air. Moreover, potential changes to our coverage areas 
could greatly impair the ability of a significant number of the 
nearly 60 million Americans who rely exclusively on over-the-
air television to receive the local stations they count on 
most.
    Our goal at NAB is to help those broadcasters who remain on 
the air continue to have the same opportunities to serve the 
American people they had prior to the auction: the opportunity 
for the station in Boston to offer wall-to-wall coverage of the 
terrifying bombings, the opportunity for the Tri-State area 
station to help direct local residents to lifesaving services 
during Hurricane Sandy, and the opportunity for the station in 
Oklahoma to warn its viewers about the path of deadly 
tornadoes.
    Some have described this auction as a win-win-win, although 
with the final victory being awarded to the broadcasters. To be 
candid, from what we have seen so far, we will be lucky to 
escape with a tie. In any event, to avoid a loss for the 
broadcast industry, the FCC must ensure three things. First, 
broadcasters who remain on the air should not be harmed by the 
voluntary auction. The Spectrum Act dictates that broadcasters 
must be able to serve the same coverage area and same viewers 
they did the day after the auction as they did the day before. 
The FCC should not, for example, move the goalpost by altering 
the formula by which they calculate these coverage areas. No 
harm also means that the FCC should not force remaining 
broadcasters to go out of pocket for reasonable expenses when 
they are forced to make way for the wireless industry. The 
Commission must treat the TV Broadcaster Relocation Fund as its 
relocation budget. If not, broadcasters could face significant 
costs associated with moves they never sought and that offer 
them no benefits whatsoever.
    Second, the Commission must develop a band plan that avoids 
interference between broadcasters and wireless operators. The 
engineering behind the FCC's variable plan has not yet been 
vetted in an open forum, and the time has come to put the 
staff's engineering assumptions to the test. As we know from 
experience, post-auction interference problems take far longer 
to fix than if they had been addressed openly, transparently, 
and thoroughly up front. For the same reason it is essential 
that the FCC complete international coordination prior to the 
auction and repacking, an unfinished product leaves the 
Commission with far less revenue and also forces the Commission 
into a jagged variable band plan where it has to match 
broadcasting wireless services in an unprecedented manner 
across the northern third of the Nation.
    Third, despite the fact that low power television and TV 
translators are not formally protected in the statute, the 
Commission must nevertheless do all it can to preserve these 
critical services. As last week's letter signed by 57 House 
members representing rural and mountainous districts made 
clear--and I would like to submit that letter for the record, 
if possible----
    Mr. Walden. Without objection.
    Mr. Kaplan. Translators are indispensable means by which 
rural communities, especially out West, receive their free 
over-the-air news, weather, and emergency news information. 
Also at a time where the Commission and many Members of 
Congress have expressed concerns about diversity in media 
ownership or programming, low power television provides one 
important answer. If the Commission repacks too aggressively, 
literally thousands of translators and many more low power 
television stations will disappear and never return.
    In closing, the NAB continues to vigorously support the 
voluntary market-based incentive auction authorized by Congress 
and to see it conducted as expeditiously as possible. But we 
must also remember that getting it done right is more important 
than simply getting it done right now. Our aim is to preserve a 
healthy and robust broadcast industry and to continue to serve 
our local communities in a way that no other service can 
duplicate. Thank you again for the opportunity to testify, and 
I look forward to your questions.
    [The prepared statement of Mr. Kaplan follows:]



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    Mr. Walden. Thank you, Mr. Kaplan. We appreciate your 
counsel.
    Now we will turn to Preston Padden, the Executive Director, 
Expanding Opportunities for Broadcasters Coalition. Mr. Padden, 
welcome back and we look forward to your comments.

                  STATEMENT OF PRESTON PADDEN

    Mr. Padden. Thank you, Chairman Walden and Ranking Member 
Eshoo and members of the subcommittee. My name is Preston 
Padden and I am the Executive Director of the Expanding 
Opportunities for Broadcasters Coalition of more than 70 
television stations interested in participating in the auction, 
under the right conditions.
    Chairwoman Clyburn has provided great leadership in moving 
this auction forward. Commissioners Pai and Rosenworcel are 
very constructively engaged in these auction issues. Auction 
Chair Gary Epstein, Bureau Chiefs Ruth Milkman, Bill Lake, and 
Julius Knapp are working diligently to develop recommendations 
for the auction design and rules.
    We are cheerleaders for this auction. In 2014, the FCC can 
reallocate the full 120 megahertz in the National Broadband 
Plan, even in the largest markets, as we would be happy to 
demonstrate in detail to the committee staff. The number one 
challenge facing the FCC is to make sure that payments to 
broadcasters are sufficiently large to induce a substantial 
number of TV spectrum sellers to participate in the auction. If 
a large number of TV stations offered to sell their spectrum, 
the FCC will succeed in reallocating 120 megahertz and in 
raising the revenues necessary to pay the selling TV stations, 
pay the repacking expenses of non-participating stations, fully 
fund FirstNet, and contribute to deficit reduction. If an 
insufficient number of TV spectrum sellers participate, the 
auction will fail at its inception, and there will be no need 
to debate other issues such as band plans and wireless carrier 
eligibility. All TV stations enjoy a range of attractive 
alternatives other than participating in the incentive auction.
    To be sure, economists and lawyers easily could construct 
rules and auction designs such as scoring stations and 
weighting the auction that would have the effect of limiting 
payments to potential TV spectrum sellers. But this would lead 
to less spectrum being offered, less spectrum being 
reallocated, and less revenue being generated.
    Prominent legislators of both parties have expressed their 
concerns about counterproductive proposals to diminish 
incentives. On March 13, Chairman Walden issued a statement 
noting ``without broadcasters, there is no spectrum to 
auction,'' and adding ``it would be foolhardy to limit the 
incentives from the get-go.'' On June 4, the chairman emeritus 
of the full committee, Congressman Dingell, wrote a letter 
asking the FCC to estimate the effect of scoring and weighted 
auctions on the number of participating TV spectrum sellers and 
on the amount of spectrum recovered. The FCC will be buying 
spectrum, not TV station businesses. Scoring based on 
characteristics of the station is irrelevant to the auction, 
and the statute authorizes the FCC to pay stations based on 
competitive bidding, not based on scoring.
    Finally, as we understand the FCC's likely auction design, 
it will freeze those stations with the greatest clearing and 
repacking impact at high-priced early rounds of the auctions, 
while stations with lesser clearing and repacking impact 
continue to descend to lower priced rounds, thereby 
automatically paying more to the stations most important to the 
FCC's clearing goal. Simply put, the FCC should offer the same 
high initial prices to all stations in the same market and rely 
on the statutorily prescribed auction to discipline final 
prices.
    We urge the Commission to provide broadcasters with more 
information about auction design and rules. If there are border 
markets where the FCC cannot recover 120 megahertz at this 
time, we support a variable band plan to avoid a lowest common 
denominator limitation on nationwide spectrum recovery. The FCC 
should allow stations to channel share with any other station 
in their DMA, and to change their city of license to match the 
host sharing partner. The FCC should continue its productive 
discussions with Mexico and Canada without making the final 
conclusion of those discussions an obstacle to holding the 
auction in 2014, just as the FCC previously has conducted other 
auctions without final resolution of border issues.
    Finally, the clear congressional priorities of funding 
FirstNet and making a dent in the deficit militate against 
restricting participation in this auction by any wireless 
carrier. We need robust competition among all wireless carriers 
to assure that the auction produces the maximum revenues 
possible. Concerns about market concentration should be left to 
another proceeding on another day when they may well have been 
obviated by the recent dramatic marketplace strengthening of 
Sprint and T-Mobile.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Mr. Padden follows:]



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    Mr. Walden. Mr. Padden, thank you for your testimony. We 
will now move to Kathleen Ham, who is the Vice President, 
Federal Regulatory Affairs of T-Mobile. Welcome.

                   STATEMENT OF KATHLEEN HAM

    Ms. Ham. Thank you. Good morning, Chairman Walden, Ranking 
Member Eshoo, and members of the subcommittee. My name is 
Kathleen O'Brien Ham, and I am the Vice President for Federal 
Regulatory at T-Mobile U.S. Thank you for inviting me to 
testify today.
    T-Mobile is the fourth largest wireless carrier, serving 
about 43 million subscribers and employing 38,000 people in the 
U.S. Since the government blocked our merger with AT&T 18 
months ago, we have been reinvigorating our brand and our 
network. Earlier this year, we announced our uncarrier 
strategy, setting us apart from our larger competitors. We 
dropped traditional price plans in favor of affordable, simple 
choice plans. We said there is no need for annual service 
contracts anymore. We gave customers the option to bring their 
own device or buy one from us, interest free. We launched JUMP, 
so customers can upgrade their phones when they want, not when 
they are told.
    These innovative moves are putting pressure on our larger 
competitors who are now copying our offers. That is what 
healthy competition achieves. On top of all this, we are 
rolling out our 4G LTE at a record-shattering pace.
    The upcoming incentive auction is critical to the future of 
wireless competition. Spectrum is the air we breathe. Without 
it, we cannot compete and we cannot innovate. The FCC should 
maximize the amount of spectrum auction for mobile use. More 
spectrum is good for competition and good for auction revenues, 
plain and simple. We commend the Commission for its ongoing 
work to develop auction rules. To ensure the rules promote 
competition and consumer choice, the FCC should consider three 
critical objectives.
    First, encourage broadcaster participation to maximize the 
amount of spectrum auctioned. Second, adopt a 600 megahertz 
band plan that maximizes auctioning paired spectrum for mobile 
use. Finally, and most important, adopt reasonable spectrum 
aggregation limits so the dominant carriers do not foreclose 
other competitors from this last best opportunity to acquire 
low band spectrum.
    All carriers agree there needs to be competitive limits on 
spectrum. The only dispute is how and when to employ them. T-
Mobile has proposed an overall limit on the amount of low band 
spectrum that any carrier can hold, and we have said no carrier 
would be shut out of the incentive auction in any market, even 
if they otherwise exceed the limit.
    Despite what you may be hearing, limits on spectrum 
concentration are consistent with Congress' 1993 directive to 
promote competition. It is that visionary law that is the basis 
of the billions of dollars in investment and the creation of 
millions of jobs that wireless competition has channeled into 
the U.S. economy for the past 2 decades.
    Why do we need reasonable spectrum aggregation limits? 
Three reasons. First, all spectrum is not created equal. The 
600 megahertz spectrum penetrates buildings, is cheaper to 
deploy in both rural and certain urban settings. Today, the two 
largest carriers control about 80 percent of the spectrum below 
1 gigahertz, half of which they got for free from the 
government in the 1980s. All carriers need a mix of both high 
and low band spectrum to effectively compete. T-Mobile, even 
with its good high band spectrum position today, holds no low 
band spectrum. Second, the two dominant carriers have much to 
lose from competition. Their market power gives them a 
significant incentive, an ability to acquire spectrum to block 
competition. By contrast, T-Mobile and other smaller carriers 
value spectrum solely based on its use. Without market power, 
you don't pay more for spectrum than the use value derived from 
it, no matter who your shareholders are. In a letter shared 
with the subcommittee yesterday, smaller and rural carriers 
joined T-Mobile in calling for low band limits to protect 
competition. Finally, up front limits enhance auction revenue. 
Without them, smaller bidders may decide to sit out the auction 
or curtail their participation.
    Without a doubt, this auction will have a critical impact 
on the competitive future. The right policy choices will foster 
competition and investment. The wrong choices will move us 
backward. Thank you for inviting me to testify today, and I am 
happy to take any questions.
    [The prepared statement of Ms. Ham follows:]



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    Mr. Walden. Thank you very much, Ms. O'Brien Ham. We 
appreciate your being here.
    We now turn to Joan Marsh, who is Vice President, Federal 
Regulatory Affairs for AT&T. We welcome you here, Ms. Marsh, 
and please go ahead with your testimony.

                    STATEMENT OF JOAN MARSH

    Ms. Marsh. Thank you, sir, and thank you, Chairman Walden 
and Ranking Member Eshoo for inviting AT&T to join in this very 
important discussion today.
    To quote former FCC Chairman Julius Genachowski, ``This is 
a big deal.'' The 600 megahertz auction presents the next best 
opportunity to reallocate valuable spectrum for wireless 
broadband use, and could be the only one like it for years to 
come. But this auction is not just about new wireless 
allocations; it is also about critical public safety goals. 
There is wide agreement that the auction must generate up to $7 
billion to fund construction of the first nationwide 
interoperable wireless broadband public safety network. Auction 
revenues will also support broadcaster relocation, public 
safety research, next generation 911 services, and much needed 
deficit reduction.
    The importance of these goals has been underscored by both 
sides of the Aisle in letters to the Commission, urging them to 
adopt policies that will enhance the ability of the auction to 
meet these critical statutory goals. We agree. But success in 
meeting these goals is by no means a guarantee. This is, by 
far, the most complex auction proceeding ever undertaken, and 
the Commission must persuade two different sets of auction 
bidders to participate in two separate but interrelated 
auctions.
    In the face of this enormous complexity, there are a few 
key principles that should guide decision-making at every turn. 
You will be happy to hear I agree with two of the principles 
Ms. Ham expressed today. I would like to discuss how our one 
remaining principle in which there is some disagreement.
    The primary principle is straightforward: allow free and 
open participation in the auction by all qualified bidders. 
This approach is the only one that will maximize auction 
revenues and thereby maximize the chances for an auction that 
achieve all of Congress' stated goals. If qualified bidders are 
excluded or limited in their bidding activity, less spectrum 
may be relinquished by broadcasters, the spectrum that is 
offered will sell at lower prices, and the chances of a 
successful auction will be diminished. Unfortunately, as always 
in the case of regulatory proceedings of significant import, 
there are some who want the Commission to gain the rules in 
favor of certain competitors over others. These proposals vary 
in their specifics, but they share a common theme: restricting 
AT&T and Verizon from full participation in the auction while 
steering spectrum to other bidders, including Sprint and T-
Mobile, neither of which participated in the last major 
auction. These proposals are ill-advised, as they are unlawful. 
For starters, we believe they are unnecessary. Sprint already 
has, by far, the largest spectrum portfolio of any U.S. 
wireless provider, vastly exceeding that of both AT&T and 
Verizon. Indeed, given this it is by no means certain that 
Sprint will choose to participate in the 600 megahertz auction. 
Sprint also has at its disposal substantial new capital 
resources from its owner, Japanese-based SoftBank to fund any 
future spectrum purchases it might choose to make. For its 
part, T-Mobile is owned by Deutsche-Telekom, one of the largest 
telecommunications companies in the world. It too has recently 
acquired substantial amounts of new spectrum, including from 
AT&T, Verizon, and the former Metro PCS. In fact, T-Mobile now 
runs ads in the marketplace claiming that its network is less 
congested and provides greater capacity than does AT&T's.
    In short, there is no basis upon which to conclude that 
Sprint or T-Mobile have a greater need to win spectrum at this 
auction than any other bidder. More importantly, to the extent 
these carriers choose to participate, there is no basis to 
conclude that they lack the resources to bid competitively and 
win, absent auction rules that either make it easier or cheaper 
for them to do so. Conversely, restricting or limiting bidder 
participation will come at a heavy price. If AT&T or Verizon 
are restricted, or relegated to a separate shadow auction with 
its own set of rules, spectrum values at auction will be 
suppressed and revenues reduced. This result would effectively 
ask U.S. taxpayers to subsidize the auction, undermining the 
auction's revenue goals, including that of deficit reduction. 
Such rules could also impact the calculation that broadcasters 
will make in deciding whether to participate or not.
    For these reasons, AT&T has urged the Commission to adhere 
to its statutory mandate and conduct an open and competitive 
auction that awards spectrum to the highest bidder. This 
approach is not only consistent with the law, but it would also 
offer the best prospect for a successful auction that meets all 
of Congress' goals.
    My written testimony includes comments in other areas of 
great interest to AT&T, including the band plan, the need to 
get the engineering right, the efforts of the industry to find 
consensus, and the role unlicensed services can play in this 
auction. As to broadcaster participation, AT&T believes that 
broadcasters who come to the auction table are not selling a 
broadcast business. They are relinquishing their rights to 6 
megahertz of spectrum, much needed for mobile wireless use. An 
evaluation mechanism adopted in the reverse auction should be 
consistent with that reality and opening prices should be set 
at a level that will encourage participation.
    In conclusion, this auction presents enormous opportunity 
and risk. The stakes are as high as the issues are complex. 
AT&T remains confident that under the able leadership of 
Chairwoman Clyburn, Commissioners Pai and Rosenworcel, and 
Commission staff led by Mr. Epstein, the FCC will adopt auction 
rules that maximize participation and prospects for a 
successful auction, with all the intended benefits envisioned 
by Congress.
    Before I conclude, one comment on something Ms. Ham said. 
She indicated that we got a lot of our low band spectrum for 
free. That is incorrect. Although the 850 allocations were 
originally allocated to incumbents, those licenses have changed 
hands many times in the secondary market, and the vast majority 
of AT&T's portfolio of 850 spectrum was purchased in the 
secondary market, and I can assure you, we paid big values for 
that spectrum. I just wanted to correct that one fact, and I 
appreciate your time.
    [The prepared statement of Ms. Marsh follows:]



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    Mr. Walden. Thank you, Ms. Marsh. We appreciate your 
testimony.
    Now we will go to the question phase, so again, we want to 
thank you all for your testimony today, and your counsel.
    Mr. Epstein, although ineligible to participate in the 
auction, low power translators play a unique role in the 
States, especially in the mountain West where thousands of 
viewers rely exclusively on translators for news and weather 
and emergency information. Is the FCC considering auction rules 
and repacking procedures that will minimize the negative 
impacts the auction will have on TV translators and low power 
TV where possible?
    Mr. Epstein. Mr. Chairman, Commission in its notice 
recognized the public interest concerns that you just stated. 
The Congress made the decision not to include low power and 
translators in the incentive auction, but it doesn't mean that 
they are not highly valued----
    Mr. Walden. Right.
    Mr. Epstein [continuing]. Aspects and yes, in considering 
the repacking and other aspects of the incentive auction, that 
translators--we asked specific questions about translators and 
low power.
    One other point that I would like to quickly make----
    Mr. Walden. Yes, sir.
    Mr. Epstein [continuing]. And that is that in our--and this 
may be a misapprehension on some people's part. In any of our 
band plan deliberations, what we are seeking to do is to have a 
core amount of spectrum across most of the United States. There 
may be some areas which are impaired because of issues which I 
am sure we will discuss, but in rural areas, we are not seeking 
to eke out the last amount of spectrum, and that is especially 
in recognition of the issue you just stated.
    Mr. Walden. I appreciate that. Thank you.
    Again, Mr. Epstein and Mr. Kaplan, the Spectrum Act 
requires the FCC to follow the methodology in OET Bulletin 69 
when repacking the broadcast band. But the FCC has released 
multiple public notices on changes to the software and inputs 
it intends to use to run the repacking analysis, including the 
use of new data and assumptions. Mr. Kaplan, do you believe 
that the proposed changes to the OET 69 software comport with 
the Act, and Mr. Epstein, why are those changes necessary?
    Mr. Kaplan. I believe the changes now on the fourth round 
of changes as of last night are both unlawful and unwise.
    Mr. Walden. OK. Mr. Epstein, do you have a different view 
of that?
    Mr. Epstein. Yes, I do. I have a different view.
    Mr. Walden. I figured as much.
    Mr. Epstein. Statute requires us to maintain the 
methodology utilized in OET 69. We believe we are maintaining 
the methodology. What we are looking at is updating the inputs. 
We are doing such things as using 2010 census instead of 2000 
census. It seems to make a lot of sense to us to update the 
inputs to the software. The original software is just not 
capable of operating with the incentive auction----
    Mr. Walden. So you are making changes in the methodology?
    Mr. Epstein. We are not.
    Mr. Walden. OK. Mr. Kaplan, why do you think these are 
unwise, illegal, and whatever else you said?
    Mr. Kaplan. Well when I worked at the FCC, when Congress 
told us to do something, we did it. Those were the easiest 
times, when it was clear. Congress made it very clear as to 
what the FCC should do. There was a very simple methodology--
actually very complicated for most of us, but for engineers, 
very simple--about how to go about calculating our coverage 
areas. Congress was wise to not allow the FCC to move the 
goalpost, mostly to create certainty, which you talked about in 
your opening statement, about what broadcasters will 
participate, what won't and where we might cover. As we did our 
analysis on the changes that are occurring in OET 69, they 
become widely inaccurate. We get different results each run we 
do, and they surprisingly--or unsurprisingly--shrink our 
coverage areas quite a bit in certain areas of the country. And 
so therefore, we think it runs far afoul of what Congress 
intended.
    Mr. Walden. All right. We will follow up on this 
discussion.
    Mr. Epstein, the FCC staff has taken the unusual step of 
freezing not only new but also pending applications by TV 
stations to modify their viewing areas. Some of these 
modifications have been pending for years. These mods will 
allow broadcasters that wish to remain on the air to bring 
local news emergency information to a larger audience in local 
markets. Is the Commission considering any kind of analysis to 
determine whether some can be granted without disrupting the 
incentive auction? And Mr. Kaplan, do you know of an approach 
that would prevent the mods from making the repacking process 
more difficult?
    Mr. Epstein. Mr. Chairman, yes we are analyzing the station 
applications that are pending. Just two sentences worth of 
background. You and Congress and the statutes set a specific 
date for applications to be considered in the repacking. These 
applications were either pending or not granted by that date. 
The FCC found in its notice it had the discretion to grant 
them, but put a temporary freeze in place so we can analyze 
them.
    Mr. Walden. But you are in that process?
    Mr. Epstein. We are in that process.
    Mr. Walden. Because I would think there would be some 
markets as you described where----
    Mr. Epstein. We have also----
    Mr. Walden [continuing]. You would get into a problem.
    Mr. Epstein. We have also put in place a waiver request for 
particular hardship. So the answer to your question is yes, we 
are analyzing those stations.
    Mr. Walden. Mr. Kaplan, do you care to comment?
    Mr. Kaplan. Any time you freeze--and this goes for any 
industry--you freeze an industry from acting, you freeze 
investment and you freeze any outside investment, especially in 
that industry. And that is what is going on right now in the 
broadcast industry. We have actually proposed another solution, 
perhaps, that we hope the FCC would adopt, which is, I think--
and everyone can agree might help the process in general, which 
is to move forward on this portion of the incentive auction 
order, and not wait for issues like band plan, competition, 
other things, but actually adopt an order making the decisions 
that are--of things that are proposed in the notice of proposed 
rulemaking on these issues. Therefore, you won't have a need 
for a freeze because you will--the FCC will then have decided 
where they come down on what stations are protected and what 
stations aren't, and we would fully support that.
    Mr. Walden. Mr. Epstein, did you want to comment?
    Mr. Epstein. Just briefly. This is an overriding comment. 
Anything that I say with respect to recommendations ultimately 
has to be acted on by the Commission.
    Mr. Walden. Sure.
    Mr. Epstein. What the staff does is make recommendations to 
the Commission, and the Commission is the actual decision maker 
here. We are analyzing stations. What we are concerned about is 
in the process, and a complicated process like the incentive 
auction, we don't want to get ahead of ourselves and make 
decisions which we may regret later, which will completely--
which will significantly affect our repacking. So we are doing 
exactly as Mr. Kaplan said. We are trying to determine whether 
these stations will have any effect on repacking.
    Mr. Walden. All right. I appreciate your answers to my 
questions.
    We will now turn to the gentlelady from California, the 
Ranking Member, Ms. Eshoo, for questions.
    Ms. Eshoo. Thank you, Mr. Chairman, and thank you to each 
one of you. I think that this is not only a very important 
panel, but your testimony is--I mean, we are hanging on every 
word that each one of you are saying. Obviously there are 
differences between you.
    I want to go to Ms. Marsh first. There is something that is 
really bothering me about this is as Mr. Waxman said, a straw 
man being set up, that there are those that want to exclude or 
seeking to have AT&T and Verizon excluded from this process. 
There isn't anyone that has suggested that. I haven't found 
that. I have tried Googling it. I have asked my staff to 
research it. There isn't anyone that has suggested that or is 
for that. I think I heard a suggestion that if it isn't--if 
this isn't set up the way you want it, that AT&T is simply not 
going to participate, which I think is a threat that unless it 
goes exactly the way you want it, the entire auction is going 
to fail, that we won't be able to reduce the deficit, we won't 
produce the dollars for the interoperable nationwide public 
safety network, and the auction won't be successful. Are you 
actually stating that if you don't get your way that you are 
just not going to participate?
    Ms. Marsh. No, ma'am, and I apologize if I suggested that. 
I certainly did not suggest that AT&T will not participate. But 
we do believe if there are limitations imposed, even if they 
are not exclusions by name, they could act to exclude----
    Ms. Eshoo. So let me just ask you this. If, in fact, there 
is not room for competition by smaller carriers, you think that 
the auction will fail?
    Ms. Marsh. No, I believe that the auction can be set up so 
there is room for all bidders to come and win, and that is 
exactly what we have seen in the last two major auctions at the 
FCC.
    Ms. Eshoo. So how, Ms. Ham, does that--I think she just 
said something that may please you.
    Ms. Ham. Yes. Well, we are in favor of broad participation, 
yes. I used to run the spectrum auctions program at the FCC, 
and I ran the early PCS auctions and I saw what a successful 
auction looked like. Successful auction is one where you have a 
lot of bidders bidding in a lot of markets, OK? That is what T-
Mobile would like to see in this auction. That is what we think 
will be accomplished with reasonable spectrum aggregation 
limits. As you indicated, we and others are not saying exclude 
AT&T and Verizon. What we are worried about--and bear in mind, 
we are not even sure how much spectrum there is going to be in 
this auction. It all really depends on what broadcasters show 
up.
    Ms. Eshoo. Voluntary, right.
    Ms. Ham. And if there is less spectrum here, there is a 
much greater likelihood that AT&T and Verizon can divide and 
conquer, OK? So to Harold's No Piggies Rule, I think that is 
what we are talking about.
    Ms. Eshoo. I was waiting for someone to bring that up on 
the panel.
    Ms. Ham. I think what we are talking about--but anyway, it 
is ensuring that there is competition after this auction. The 
FCC hasn't run an auction in 5 years. This is the most 
important auction that they have run since the PCS auctions. 
Back then, there was a duopoly. There was a cellular duopoly, 
and guess what the Commission did? The Commission put in place 
reasonable aggregation limits. T-Mobile stands here today as a 
competitor because of that good policy. That is what we are 
for.
    Ms. Eshoo. Thank you.
    Mr. Epstein, this is just a curiosity question. Do you 
think that the FCC will meet its goal of holding the auction in 
2014?
    Mr. Epstein. What our charges from Chairwoman Clyburn is 
for the staff to do whatever it can to place the options before 
the Commission to adopt a report and order in 2013 and to hold 
the auction in 2014. That is what we plan and intend to do.
    Ms. Eshoo. You have confidence that it can happen in 2014, 
though?
    Mr. Epstein. Whether it happens in 2014 I guess is above my 
pay grade, but we will do everything we can to empower the 
Commission to make that decision and to hold the auction.
    Ms. Eshoo. You are a wonderful diplomat.
    I think everyone in this room knows that--how strongly I 
feel about unlicensed spectrum, you know, the fight to get that 
into the spectrum bill. I think a real victory for the country 
that we did, and that we continue on that path to not only 
protect it, but enlarge it. In 2011, the Stanford Institute for 
Economic Policy Research--it is known at home as SIEPR--it is a 
very important organization at Stanford. It looked at the 
economic benefits of unlicensed and concluded that making more 
of it available would ``likely add significantly to government 
revenue and could result in higher auction revenue than if all 
new bandwidth were sold under exclusive licenses.'' Mr. Feld, 
do you agree with that assessment?
    Mr. Feld. Absolutely. We have seen historically every time 
that we have, you know, added more unlicensed spectrum and made 
that more available, it has just led to a fantastic boom in new 
services and new devices that product exciting new economic 
opportunities. '99--in '89, rather, when we first went to 
garage door openers; in '97 we opened up the UNII band which 
laid the ground work for Wi-Fi and all of the innovations that 
that has brought. With TV white spaces in only the short time 
that it has actually been available for us to certify 
equipment, we have got a huge backlog of orders among WISPs. We 
are seeing other countries in Europe, we are seeing Kenya and 
South Africa, New Zealand all looking at this technology with 
pilot projects popping up all over the world. This is just a 
fantastic engine of not just innovation, but also of economic 
opportunity and growth.
    Ms. Eshoo. Thank you very much.
    I have other questions, Mr. Chairman, but I will submit 
them to the witnesses. Is there a timeframe in which witnesses 
need to respond to us when we submit questions to them? I don't 
know the answer to that one.
    Mr. Walden. Ten days.
    Ms. Eshoo. Ten days? Good. OK, thank you very much.
    Mr. Walden. The lady's time is expired, and the chair 
recognizes the lady from Tennessee, the vice chairlady, 
Representative Blackburn for 5 minutes.
    Mrs. Blackburn. Thank you, Mr. Chairman. Again, I thank you 
all for being here. I have to tell you, it is interesting to 
hear such a spirited conversation, and I think that we all 
appreciate this. I hope we are all focused on the same goal, 
and that is getting this spectrum out to the marketplace so 
that we don't end up with a spectrum crisis.
    Ms. Ham, I want to come to you because I know that you all 
have been running an ad that claims that your network is less 
congested than AT&T's. And then I saw a Deutsche Bank financial 
statement that said Sprint is the new spectrum powerhouse and 
has more spectrum for LTE than all of its competitors combined. 
And then you are talking about AT&T being excluded. So if your 
ads are true, why would you not want AT&T in the spectrum 
auctions?
    Ms. Ham. Well again, to clarify, we are not talking about 
excluding them. In fact, it helps us to have AT&T and Verizon 
in our neighborhood, OK? I mean, we were the leaders of 
building out AWS spectrum. We did that alone, OK? It helps to 
have your competitors out there buying from vendors, et cetera, 
et cetera. It brings down the costs so we want them in the 
neighborhood, OK? That is not what this is about. And you know, 
in terms of our ads, none of those ads--I mean, T-Mobile, going 
back 18 months I think I referenced since our deal, so we got 
some spectrum from AT&T as part of that deal, OK? We got some 
spectrum from Verizon as part of the Verizon spectrum co-deal, 
and we recently merged with Metro PCS. So we are in a stronger 
position than we were 18 months ago----
    Mrs. Blackburn. Let me ask you this, then.
    Ms. Ham [continuing]. With upper band spectrum.
    Mrs. Blackburn. OK. Then if the sub-1 gigahertz spectrum is 
so important, then why did T-Mobile--why didn't they even 
participate in the 700 megahertz auction?
    Ms. Ham. Sure, thank you. Well first of all, with all due 
respect, I think we have to take the market as it is today, not 
as it was in 2006. The market has changed dramatically since 
then. There were barely even smartphones back in 2007. T-Mobile 
did participate in the 2006 auction, and we very aggressively 
built that spectrum out. That spectrum was encumbered with 22 
federal agencies, OK? We were deep in the throes of that and I 
know we visited a lot of your offices during that time about 
that issue, because clearing the Department of Justice and the 
Department of Defense is no easy job, OK?
    So the other thing I would say is we have to take the 
spectrum in the order we get it, OK? The 700 megahertz auction 
came after the AWS auction. At the time the AWS auction 
occurred, T-Mobile was hot to trot to get our 3G spectrum so we 
could compete with these guys, OK? That was the spectrum that 
was on the auction block. We put our resources into it and we 
put our resources into clearing it. And today, we are using 
that spectrum. We are probably using it the most of anybody. 
That is our LTE spectrum. So T-Mobile knows how to get its 
spectrum and use its spectrum, but we don't have any low band 
spectrum, and low band spectrum is what this auction is about.
    Mrs. Blackburn. OK. Now Mr. Feld has his hand up and I am 
going to recognize him, even though he has a No Piggies Rule 
and he is trying to hog the time. So Mr. Feld, I am going to 
recognize you for your comments, but then also in your written 
testimony, you were comparing the auction if AT&T and Verizon 
were in it, it would be akin to the Boston Celtics trying to 
play an amateur team. I am not certain, I think your testimony 
is a little exaggerated there. You know, ask your question, but 
then I also want to hear you respond, why do you have so little 
faith in these wireless providers?
    Mr. Feld. Well first of all, let me say I cannot help but 
think fondly and nostalgically of the '85-'86 Celtics, but that 
is just a product of growing up in Boston. The issue I just 
wished to raise was there were many other competitors 
comparable to T-Mobile and Sprint who--both of whom were going 
through their own internal spectrum issues, T-Mobile buying and 
clearing AWS, Sprint and the rather horrific 800 megahertz 
rebanding, that participated. They all got beat. Alltel came 
out with nothing. They had not choice but essentially to exit 
the field after they came up empty. Leap came up empty. Metro 
PCS came up practically empty. All of these players came in 
because when push came to shove, Verizon and AT&T were able to 
bring the most resources to bear on the licenses that they 
wanted to have, and nobody else could hope to outbid them. You 
know, that is what happened in 700 megahertz, and if T-Mobile 
had been there, they would have gone the same way as Alltel.
    Mrs. Blackburn. My time has expired, but I will just 
mention for the record, I read a Citibank report in preparation 
for this, and I think that Verizon now has less spectrum per 
million post-paid subscribers than any of you at the table. And 
so as we--I think we need to be careful about talking about 
trying to keep people out or restricting the auctions, and I 
yield back.
    Mr. Walden. The gentlelady yields back, and at this time 
the chair recognizes the gentleman from California, the ranking 
member of the full committee, Mr. Waxman, for 5 minutes.
    Mr. Waxman. Thank you very much, Mr. Chairman.
    As I said in my opening statement, Congress enacted this 
law, the Public Safety Inspector MACT, with multiple goals in 
mind. These goals include using auction revenue to fund 
multiple priorities, such as the creation of a nationwide 
public safety broadband and network known as FirstNet, as well 
as ensuring that the wireless marketplace remains competitive 
after the auction closes. These goals are not mutually 
exclusive. I would rather just ask the panelists, I can ask you 
all answer affirmative, but do any of you think that the FCC is 
not capable of conducting an auction that advances both of 
these critical goals? Seeing no one responding, then I will 
accept----
    Ms. Ham. They are absolutely capable of doing that.
    Mr. Waxman. OK, thank you.
    Now I would like to ask a hypothetical question. It is a 
simple hypothetical of our panelists. Let's assume that the 
incentive auction clears enough spectrum for the FCC to make 
available for sale seven paired spectrum licenses at every 
market throughout the United States. Should the FCC allow any 
one bidder to acquire all seven licenses available in a market? 
Maybe get a yes or no. Mr. Feld?
    Mr. Feld. No, certainly not.
    Mr. Waxman. And Mr. Epstein, do you want to answer that?
    Mr. Epstein. Whatever diplomatic skills I exercised with 
Ranking Member Eshoo I would like to exercise again, because we 
are the initial decision makers on that issue.
    Mr. Waxman. Well I wanted a yes or no, so if you don't feel 
you can do a yes or no, maybe because we are asking about the 
FCC I will ask the other panelists.
    Mr. Kaplan, yes or no?
    Mr. Kaplan. It is not an issue that NAB has taken a 
position on, but I don't believe anyone on this panel will 
answer that question yes, I think that only one bidder should 
win. I don't think anyone has answered that.
    Mr. Waxman. OK, Mr. Padden?
    Mr. Padden. Congress has asked a great deal of this one 
small proceeding, and that is to convince enough broadcasters 
to come in and volunteer their spectrum to raise enough money 
to----
    Mr. Waxman. But should the FCC allow, under my 
hypothetical, any one bidder to acquire all seven licenses, if 
that is what we have available, in the market?
    Mr. Padden. We believe the priority has to be to maximize 
the revenue in this market--in this auction to achieve the 
public interest goals Congress has set, including funding 
FirstNet.
    Mr. Waxman. So you think that FCC should allow it if it 
backs----
    Mr. Padden. We would defer to the market forces of the 
auction to determine the outcome.
    Mr. Waxman. Ms. Ham?
    Ms. Ham. No, I don't think any one bidder should acquire 
all of it, and I think you can have a healthy competition and 
maximize the revenue.
    Mr. Waxman. Ms. Marsh?
    Ms. Marsh. I think that it is highly unlikely, if you look 
at prior auctions, that that would ever happen. We have always 
had a diversity of winners, even when auctions were open and 
free to all participants, and as a backstop to that, the FCC 
would always retain its general authority over spectrum 
aggregation. AT&T has never suggested that general authority 
would not continue to exist.
    Mr. Waxman. OK, thank you.
    Let me ask this to Mr. Feld and Ms. Ham. When Congress 
first granted the FCC the authority to conduct spectrum 
auctions in 1993, the law included specific instructions about 
what the Commission must consider to protect the public 
interest. Under Section 309(j) of the Communications Act, the 
FCC is required to promote ``economic opportunity and 
competition'' and ensure that ``new and innovative technologies 
are readily accessible to the American people by avoiding 
excessive concentration of licenses and by disseminating 
licenses among a wide variety of applicants.'' Furthermore, 
statute prohibits the FCC to base a public interest finding 
solely or predominantly on the expectation of revenues from an 
auction. Mr. Feld, Ms. Ham, do you think these provisions are 
equally valid today?
    Mr. Feld. Absolutely. In fact, the Spectrum Act of 2012 
explicitly states in Section 6043(i) that nothing in this 
subsection shall be construed to expand or contract the 
authority of the Commission, except as otherwise expressly 
provided. Those provisions remain. They were not explicitly 
addressed. What was addressed was a methodology in which 
Congress said the rule by which you implement those things is 
to say you can't--it must be a rule of general applicability, 
which is what the Commission has before it today, and those 
remain not only legal, but we would argue under the statutes 
that you have cited, necessary.
    Mr. Waxman. Ms. Ham, you were there in the original 
auction.
    Ms. Ham. Yes, I was there. No, I think those provisions are 
very wise and valid, and as I indicated before, it is the 
reason why T-Mobile exists today and the reason why billions 
have been invested into this industry and millions of jobs have 
been created since that law was enacted. So yes, I think it is 
wise and it is good public policy.
    Mr. Waxman. I want to conclude by asking Mr. Feld, as you 
know, the Department of Justice filed a letter with the FCC 
earlier this year in support of its spectrum aggregation rules. 
The Department expressed concern that the dominant wireless 
incumbents may have the incentive to pay foreclosure value to 
acquire spectrum licenses for the purpose of blocking 
competition and preventing rivals from improving their 
competitive position through the acquisition of better 
spectrum. An article in the Wall Street Journal recently 
suggested that AT&T's proposal to acquire Leap Wireless is 
evidence that foreclosure might be a real concern, given that 
AT&T is willing to spend more than eight times Leap's 2013 
earnings to acquire the carrier. Do you think that the DOJ was 
correct to raise this concern with the FCC?
    Mr. Feld. I absolutely think the DOJ was correct, 
particularly with regard to the low band spectrum, because this 
is all there is. There is no spectrum fracking that we can use 
to get low band spectrum out of spectrum shale. There are no 
new spectrum mines that could be open now that the price of low 
band spectrum has become more valuable. This is our last chance 
to get low band spectrum into the hands of competitors, and 
therefore there is every incentive for those companies that 
could block competitors from getting it to do so. Verizon is 
advertising its low band spectrum on its LTE network. To borrow 
Ms. Blackburn's proof, they are advertising that you can get 
better reception in the woods on a Verizon system using 700 
megahertz low band spectrum. That is really valuable stuff that 
they expect even the consumers who don't know what a megahertz 
is to understand. It is incredibly valuable and we need to make 
sure that competitors have some.
    Ms. Marsh. Can I respond on the foreclosure point?
    Mr. Waxman. It is up to the chairman, but I certainly would 
want you to be able to.
    Mr. Walden. Well, the gentleman's time has expired, but if 
you could make it very, very brief.
    Ms. Marsh. Yes, the foreclosure point is fully addressed by 
the FCC's build requirements. The FCC today and in the prior 
auction and all transactions have very stringent build 
requirements that requirement any licensee that acquires 
spectrum to build it in very specific timeframes, or face 
significant consequences. We think that that completely 
eliminates any potential threat of buying spectrum simply to 
foreclose competitors.
    Mr. Waxman. Thank you. Thank you very much, Mr. Chairman.
    Mr. Walden. Thank you very much. The gentleman's time has 
expired, and yields it back. At this time, the chair recognizes 
himself for 5 minutes. Again, I want to thank all the witnesses 
for your testimony today. I think it is another outstanding 
panel that we have here today.
    Let me just start, Mr. Kaplan, with some of your testimony 
that you gave today, and if I can just get a little more 
comment on this. I just read a little bit from page 7 you were 
talking about in February of this year that the FCC's staff 
presented what the FCC staff believed to be the seven key 
components of the voluntary broadcast incentive auction, and 
you list those seven. But then you say this: this list is 
remarkable for the fact that almost a year and a half after 
passage of the Spectrum Act, the affected industries still have 
no clear idea how and when the FCC plans to address these key 
components. Would you care to comment on that?
    Mr. Kaplan. Sure, thank you. One concern we have is 
transparency, and not just transparency for transparency's 
sake, but transparency and engagement, and that means, on the 
list of seven that is there, aside from the first one which 
actually was mandated by Congress, the options that were 
available to the FCC for participation by broadcasters, but is 
bringing people together. And actually, we had a very nice 
conversation before this hearing, so thank you for bringing 
this panel together, because I think we have already 
accomplished some things before the hearing--to work together 
prior to things coming out to figure out how we, I guess to 
quote Jerry Maguire, how we can help you. So in other words, we 
would love to be of assistance, as I know T-Mobile and AT&T, 
Harold, Preston, to the Commission, but understanding where 
they are in the process is enormously important, because 
otherwise, we are shooting in the dark. So all of our comments 
about transparency are about transparency and engagement. And 
to Ms. Eshoo's point before about the auction in 2014, to get 
that done, we all need to be engaged. We are ready to do it. We 
want to do it expeditiously, but not knowing where things stand 
and then finding out, let's say, the night before a hearing 
where we might be and then trying to figure out things really 
quickly is not necessarily a recipe for success. So we are 
ready to do it, but I think transparency and engagement are 
central.
    Mr. Walden. Thank you very much. Mr. Epstein, I know this 
is an issue that is very important to both Chairman Emeritus 
Dingell and to me because of our districts, where we are 
located. Mr. Dingell's being in Michigan and mine being in 
northwest Ohio, and of course, with Ontario being our next-door 
neighbor. Has there been further progress on coordination of 
efforts on setting a timeline in getting things worked out on 
international agreements with the Canadians, especially when we 
are looking at the whole issue of spectrum and we are looking 
at trying to get that completed prior to or after? What is it 
looking like right now at the FCC?
    Mr. Epstein. Yes, Mr. Chairman, if you would indulge me for 
a moment, I would like to respond to Mr. Kaplan. I can either 
do that now or----
    Mr. Walden. Go ahead.
    Mr. Epstein. OK. Just very briefly, I think I agree with 
the need for transparency and engagement. I do slightly 
disagree with what the Commission has done over the last year. 
There have been, you know, four workshops, there have been 
public notices that have come out, there are 460 comments that 
have been filed. I have actually--of all of the panel members 
that are here, I think the NAB has been in more than 15 times 
to have meetings with the Commission's staff. We welcome their 
engagement and we welcome the engagement of everybody on this 
panel. If we can do better, we will do better with respect to 
that. But I think that is a crucial and important part of the 
incentive auction process.
    With respect to the question about border issues, we agree 
that it is important to allow us to do as much as we can to 
reach agreements with Canada and Mexico to allow us to repack, 
to allow us to reclaim more spectrum in the border areas. We 
intend, of course, to follow the statutory requirement to 
coordinate with Canada and Mexico. We are committed to 
advancing the process. We are working very closely, both with 
the International Bureau and the Department of State. Staff 
level meetings have been held for at least the last 4 or 5 
months on technical matters. Chairwoman Clyburn places this at 
the highest priority level. She is traveling to Canada this 
Thursday and has asked me to accompany her to engage in further 
high level discussions in order to attempt to reach agreements. 
What we intend to do by the time of the auction is to advance 
the process sufficiently to provide as much certainty as 
possible.
    It is not a different or all that unusual problem with 
respect to spectrum discussions and negotiations. In almost all 
of the auctions, like the 700 megahertz auction, the analog to 
digital transition, we have had similar issues and have had 
similar successes.
    Mr. Walden. Thank you very much, and my time has expired, 
and the chair at this time recognizes the gentleman from 
Michigan, Chairman Emeritus Mr. Dingell, for 5 minutes.
    Mr. Dingell. Mr. Chairman, I thank you for your kindness.
    As you know, I am strongly interested in seeing that the 
incentive auctions authorized by the Middle Class Tax Relief 
and Job Creation Act of 2012 proceeds in a fair and transparent 
manner. With respect to the reverse auction, broadcasters 
should be treated fairly, and I will do my level best to ensure 
that the Commission takes no action that would deprive 
constituents in border areas of free over-the-air television. 
Concerning the forward auction, the Commission should implement 
simple rules in a transparent manner that allows the greatest 
number of parties to bid on reclaimed broadcaster frequencies. 
As the representative of the Act's implementer, I will be most 
interested to hear Mr. Epstein's response. Consequently, my 
questions this morning will be directed at him. They will 
require only a yes or no.
    Mr. Epstein, I want to begin with the reverse auction. 
Section 6403(b)(1) of the Act specifies that the Commission 
may, subject to international coordination along the border 
with Mexico and Canada, reassign and reallocate broadcast 
frequencies. Is that correct?
    Mr. Epstein. Yes.
    Mr. Dingell. Mr. Epstein, in the Commission's July 2, 2013, 
response to my letter of inquiry about the reverse auction, you 
made the following statement. The language used in Section 
6403(b)(1) of the Act is, and I quote, ``identical to that used 
by the Commission in describing its handling of the earlier DTV 
transition, in which the Commission adopted our proposed 
allotments for these stations, subject to our continuing 
negotiations with Canada, notwithstanding the broadcasters' 
request to the contrary.'' One could reasonably assume that 
based on that statement, that the Commission may assign and 
reallocate broadcast frequencies pursuant to the Act while 
negotiations with Canada and Mexico are still ongoing. Is that 
correct?
    Mr. Epstein. Yes.
    Mr. Dingell. Is that going to happen?
    Mr. Epstein. As I stated in response to the prior question 
that we are doing everything we can to provide as much 
certainty as we can----
    Mr. Dingell. My people are not feeling much certainty on 
this matter, and I would remind you that this is subject to 
very intense discussions, or should be, between the United 
States, Mexico, and Canada in order to ensure that the services 
to our people up there do not go dark.
    Is it correct that the Commission has not yet finalized its 
order to implement Section 6403 of the Act, yes or no?
    Mr. Epstein. Yes.
    Mr. Dingell. In that case, Mr. Epstein, I would urge that 
the Commission in its final order not to reassign or reallocate 
the broadcast frequencies until it has concluded negotiations 
with Mexico and Canada. As I noted earlier, my constituents 
live in a border region and stand to see television stations go 
dark if the Commission doesn't get this right. For their sake, 
I prefer you measure twice and cut once when it comes to 
broadcast repackaging.
    Now Mr. Epstein, I would like to turn my attention to the 
forward auction. I note that the Commission has had a 
proceeding pending on its spectrum screen since September, 
2012. Does the Commission intend to complete this proceeding 
before releasing new rules for the forward auction authorized 
by Section 6403(c) of the Act? Yes or no?
    Mr. Epstein. Congressman, that is above my pay grade. The 
schedule for the Commission acting on this order is something 
that the Commission will take up. What I do know is that the 
Commission has expressed a desire to provide clarity before the 
incentive auction goes forward.
    Mr. Dingell. You are comforting me but only slightly.
    Now, Mr. Epstein, Section 6403(c) contains an interesting 
subparagraph which provides that the Commission may not grant 
licenses through the forward auction, reassign or reallocate 
broadcast frequencies, or will revoke spectrum usage rights 
unless it proceeds--unless the proceeds of the former--forward 
auction are greater than the following three factors combined: 
those factors are the total amount of compensation that the 
Commission must pay successful bidders in the reverse auction; 
the costs of conducting a forward auction; and the estimated 
costs for the Commission to pay for broadcaster reallocations. 
In addition, it is in the public interest that the Commission 
ensure that the auction raises a significant amount of money in 
order to help fund the build-out of FirstNet. Together, these 
constitute significant pressure on the Commission to maximize 
the auction's revenue, do they not? Yes or no?
    Mr. Epstein. Yes, it does. Yes.
    Mr. Dingell. OK. Now Mr. Epstein, to that effect, will the 
Commission adopt transparent and simple rules to encourage 
participation by the broadest group of wireless providers in 
the forward auction? Yes or no?
    Mr. Epstein. Yes.
    Mr. Dingell. Now I would like to ask unanimous consent, Mr. 
Chairman, that the July 16 letter sent by Mrs. Engel, 
Butterfield, Green, Braley, Matheson, Barrow, Tonko and I to 
the Commission about the forward auction as well as any 
response that the Commission may tend or may care to send to be 
included in the record.
    [The information appears at the conclusion of the hearing.]
    Mr. Dingell. The entire incentive auction must be subject 
to rigorous and ongoing oversight in order to assure the 
transparency and that it achieves to Congress' intent as set 
forth in the Act.
    I thank you for your courtesy, Mr. Chairman. Thank you, Mr. 
Epstein.
    Mr. Walden. Mr. Chairman, without objection, your letter 
will be, and its response, entered into our record.
    Mr. Dingell. Thank you, sir.
    Mr. Walden. Yes, sir. Now turn to gentleman from Illinois, 
Mr. Shimkus, for 5 minutes.
    Mr. Shimkus. Thank you, Mr. Chairman. I think my questions 
are going to follow right along with Mr. Dingell's point, and I 
will go to Mr. Epstein.
    You have studied the Spectrum Act to a sufficient degree 
that you and I can walk through--this is a question--through 
the auction revenues proceeds from the forward auction that are 
contemplated by this Act, so I want to go through the sections, 
and you are prepared to maybe answer?
    Section 6413(b)(3) we have $7 billion for FirstNet. 
6413(b)(2), $135 million for State and local implementation 
funds. 6413(b)(4), $100 million for public safety research. 
6413(b)(5), $20.4 billion for deficit reduction. We are good on 
the numbers so far?
    Mr. Epstein. Congressman, I don't have the statute in front 
of me, but it sounds correct, subject to my confirmation.
    Mr. Shimkus. OK. So we have got $115 million for Next Gen, 
$200 million for wireless, $1.75 billion for TV broadcasters' 
relocation. That comes to about $28.7 billion is what is 
projected under the Act, I am being told. Will the auction 
rules that you are devising enable the production of the 
proceeds in this amount?
    Mr. Epstein. I can't predict, OK, how much money we will 
raise in the auction. It is a market-based auction. What our 
job is is to make the auction attractive and simple and get 
maximum broadcaster participation.
    Mr. Shimkus. OK, let me go. If in addition to this proposed 
hopefully $28.7 billion, do we also--might we also need 
additional proceeds to pay broadcasters who participate in the 
incentive auction?
    Mr. Epstein. The total amount of money that we will need 
will include the amount, of course, that we have to pay 
broadcasters who----
    Mr. Shimkus. So it might be more than $28.7?
    Mr. Epstein. Again, I don't have the exact numbers.
    Mr. Shimkus. So here is the crux of the question, and it is 
line with the letter that the Democrats sent. Are you designing 
an auction that will produce only ``minimum proceeds'' 
described in the Spectrum Act, or are you trying to design an 
auction that reaches the goals of the Spectrum Act that we just 
kind of went over?
    Mr. Epstein. I think I--in my testimony, I talked about the 
four goals that were put before us by Congress, which include 
to maximize the amount of spectrum which is repurposed. The 
second goals are the fiscal goals, which are equally important, 
and they--I talked about the statutory requirements that are to 
pay the broadcasters, to pay the reimbursement, to pay our----
    Mr. Shimkus. OK, so let me follow up, because again, there 
is another one I want to get to. If we impose restrictions to 
AT&T and Verizon, can we get these dollars?
    Mr. Epstein. It is an issue which is before the Commission. 
It is an issue you heard today being debated by two of the 
major carriers. They take different positions on them. One 
carrier here says that you will maximize auctions by limiting 
participation. Another carrier takes the exact opposite view. 
So these are the difficult issues that will be before the 
Commission to determine which of these is correct and in the 
public interest----
    Mr. Shimkus. The public interest, the public policy 
designed by the legislation which was passed----
    Mr. Epstein. Correct.
    Mr. Shimkus [continuing]. Which was to ensure that we had 
the funds available to roll out our first responder 
communications system, and all these other applications. So we 
have to get it right, and that is kind of why we are focusing 
on this. We know there is a struggle, but this is our best 
spectrum. It is not a small proceeding. This is a big deal. It 
is our best spectrum, and really, our biggest bite at the 
apple, and hence the oversight hearing on this.
    Let me just finish up with a question, Mr. Feld. You almost 
had me when you talked about fracking, because I was there with 
you until--but you do propose a position which I find is more 
challenging for me that when you pull away some spectrum for 
other use, the remaining spectrum is going to be more valuable. 
I would like Ms. Ham and Ms. Marsh to respond whether they 
agree with that, and why or why not?
    Ms. Ham. Thank you. Well one thing I wanted to clarify to 
make sure you understand, you guys were wise in putting other 
spectrum bands into the Spectrum Act so it is not just the 
broadcast spectrum that is going to raise money for public 
safety. There are at least 65 megahertz, and if you want to put 
some of that additional DOD federal spectrum in there, you 
know, that can raise money----
    Mr. Shimkus. That is a debate for another time.
    Ms. Ham [continuing]. As well. So there are other sources, 
and I just want to make sure that you understand that. And then 
again, your other question--excuse me----
    Mr. Shimkus. Is when you in essence apportion some of the 
spectrum and you have a limited amount, does that make that 
more valuable in the overall proceeds might be more?
    Ms. Ham. Well, you know, there are a lot of different 
factors that go into, you know, auctions, OK, and one of the 
biggest factors is the amount of spectrum that is in this 
auction. T-Mobile is calling for a band plan that has 20 more 
megahertz in the auction than AT&T, OK, as part of the band 
plan. That is going to have a huge impact on revenue, so we 
want to see the maximum amount of spectrum in the auction and 
we want to see the maximum amount of participation. We think 
that is going to raise the most revenue.
    Ms. Marsh. And just to correct that, so there are different 
variations of band plans on the record, but we all agree we 
need to maximize spectrum available for auction. We believe, 
though, we have to get the engineering right, and we cannot put 
forward a band plan that has engineering challenges or 
introduces interference. On your specific question, which I 
take it to be about unlicensed allocations, AT&T supports 
unlicensed allocations if they can exist in guard bands, 
including the duplex gap, and not create interference. The 
biggest challenge would be if we introduced unlicensed 
services, and they interference with adjacent licensed 
allocations, we will suppress the value of the licensed 
allocations and we will suppress the revenue raised at auction.
    Ms. Ham. Yes, and I would just say on the unlicensed piece, 
I think we agree with that. We would like--you know, we want to 
make sure that whatever guard bands are set up for unlicensed--
T-Mobile likes unlicensed. We use unlicensed. We have Wi-Fi 
calling in all our phones, but you know, we have to have 
reasonable interference----
    Mr. Shimkus. My time is way expired. Thank you, Mr. 
Chairman.
    Mr. Walden. Those were good answers, and you are right, we 
don't want this interference thing. We have had hearings on 
things like light-squared GPS and things of that nature, and 
that is--we will go now to Mr. Doyle from Pennsylvania for 
questions.
    Mr. Doyle. Thank you, Mr. Chairman.
    Mr. Epstein, maybe just to follow up on what my friend, Mr. 
Shimkus, and Ms. Ham said. Much has been made about the role 
the auction is going to play in funding FirstNet, and yet, part 
of the Act that created the incentive auction process also 
provided for multiple funding opportunities in the form of 
partial proceeds from other auctions going forward for the 
funding of FirstNet, which Ms. Ham just referred to. Just for 
the record, what other auctions will FirstNet draw its funding 
from, and how does the FCC view its obligation to raise these 
funds?
    Mr. Epstein. Let me apologize. I am innately and completely 
focused on the incentive auction.
    Mr. Doyle. Good.
    Mr. Epstein. The Wireless Bureau is running a number of 
other auctions, you are exactly right. There are a series of 
auctions which will also contribute to the FirstNet and other 
emergency funding obligations that are there, and I can supply 
you with a list of those auctions which are teed up.
    Mr. Doyle. Thank you.
    Ms. Ham, let me ask you also. You know, members of the 
committee and stakeholders that we have heard from today have 
expressed concerns that spectrum aggregation limits will result 
in lower auction revenue. However, when I read your testimony, 
T-Mobile and other carriers are arguing quite the opposite. So 
tell us, how can an auction with limits on bidder eligibility 
result in higher revenues?
    Ms. Ham. Well I think through greater participation. I 
think, you know, again as I said earlier, we don't really even 
know how much spectrum there is going to be in this auction, 
and if there isn't a lot of spectrum, I think it is easier for 
AT&T and Verizon that have an 80 percent concentration in this 
spectrum today to be able to divide and conquer it. I think all 
the bidders who sign on to the letter that was put into the 
record I think would attest to the fact that having some 
reasonable limits--and again, we are not calling for the 
exclusion of AT&T and Verizon. Bear in mind, they already have 
80 percent of the lower band spectrum. We are talking about 
reasonable aggregation limits to give everybody else an 
opportunity, a foothold on this very important spectrum.
    Mr. Doyle. So you are saying if these reasonable limits you 
talk about are in place, that this will encourage more 
participation from smaller companies?
    Ms. Ham. Yes, absolutely.
    Mr. Doyle. I mean, how does it drive up higher----
    Ms. Ham. Absolutely, and I draw from my experience, you 
know, running these spectrum auctions in the early PCS 
auctions. We exactly did that. We had limits on the amount. You 
had a situation there where you had two cellular duopolies who 
had 25 megahertz of spectrum, and the Commission put in place 
limits on the ability for those duopolies to acquire PCS 
spectrum. The point of putting PCS spectrum out in the mid-
'90s, remember those huge phones you used to have and the lack 
of innovation and the high prices we were paying? You know, we 
don't want to go back there, OK? Putting new spectrum into the 
market is the most important auction that the Commission is 
going to run that I can think of, OK, at least a decade. It is 
very important to competition, so you need to get--you need to 
take into consideration the competitive structure of the market 
and the importance of this spectrum to competition going 
forward.
    Mr. Doyle. Mr. Epstein, I want to follow up on something 
that my friend Ms. Eshoo talked about, too. I am also very 
concerned that the band plans that are being offered by some 
stakeholders do not provide adequate spectrum for unlicensed 
usage. What do comments in the records at the FCC reflect on 
unlicensed spectrum, and how does the FCC view those comments 
in light of its responsibility to encourage innovation and 
flexible uses of spectrum?
    Mr. Epstein. Congressman Doyle, our original notice 
recognized the importance of both licensed and unlicensed 
spectrum. It is one of the four policy goals I talked about in 
my opening remarks. The Act permits use of unlicensed spectrum 
in the guard bands without auction, and what the notice does 
and what the Commission is committed to doing is a balanced 
approach. We will, of course, comply with the statutory 
requirement that the guard bands are not larger than 
technically reasonable, and the Commission will make the 
ultimate determination recognizing the importance of unlicensed 
spectrum as part of the overall plan.
    Mr. Doyle. I would urge the FCC to issue a public notice 
and hold a workshop to address those issues.
    Finally, Mr. Epstein, I--and again, just for the record, 
because there is some concern about transparency and whether 
there is engagement in transparency going on at FCC. I did hear 
you mention that there were, what, 15 ex parte meetings with 
NAB. Just for the record, can you tell us how many times you 
have--that the Commission has met with witnesses here today on 
the panel?
    Mr. Epstein. I can, but I do want to preface by saying I 
consider this extremely positive things that the Commission has 
done. We get a lot out of these meetings. We hope they will 
continue, and we encourage and welcome them. What our records 
show is that we have had 15 meetings with the NAB. We have had 
11 meetings with EOBC, the Padden organization, Public 
Knowledge, 3, AT&T, 8, and T-Mobile, 16.
    Mr. Doyle. Thank you very much. Mr. Chairman, thank you. I 
will yield back.
    Mr. Walden. Gentleman yields back and we turn now to the 
gentleman from Louisiana, Mr. Scalise, for 5 minutes.
    Mr. Scalise. Thank you, Mr. Chairman. Appreciate you 
holding this hearing. I thank all the panelists. I know you are 
all working hard to ultimately get to the point we want to get 
to, and that is to have a successful spectrum auction.
    I do want to take a moment to commend again the chairman, 
which I don't do a whole lot, but I usually just make fun of 
him. But you know, the fact that his legislation moved forward 
after years and years and years of people talking about this 
and trying to do it, he ultimately made it happen and so I do 
think it is important to note that. You know, when you see how 
hard it is to get things done in Congress, you know, the fact 
that he got us to this point is important, and that is why I 
think it is so important that we make sure now that it is done 
right. You know, when you look at the two purposes that were 
brought forward when the chairman brought the legislation that 
was ultimately included in the final Act, it was to, number 
one, make sure that we had the $7 billion to go and build out a 
national public safety network, something that hadn't been done 
since September 11, and been promised by a lot of people, but 
ultimately finally is now at the forefront of being ready to 
happen. But the other part of that was to also generate 
additional revenue to reduce the federal deficit, and that is 
an important point that can't be lost when we are talking about 
how to set up the rules, and the rules of any game are very 
important because ultimately, they can have a major impact in 
how the game is going to be played.
    And so Mr. Epstein, I want to ask you, we have had a lot of 
different testimony. There have been a lot of people for months 
and months trying to make sure that the rules are set up in a 
way that is fair, and in some cases, they want to make sure it 
is fair to them. I understand that is their job. But your role 
is to make sure it is not only fair for the people that will be 
participating, but it is also fair for the American taxpayer, 
because the American taxpayer has a big role in this. Because 
if it is not set up properly and there are limitations to entry 
that don't allow for the amount of bidding that ultimately 
yields the greatest amount of revenue, then that is less money 
that goes to reducing the national deficit. And that is 
something that we have got to watch out for, not only as 
legislators, but you as a regulator who is drafting these 
rules. If there are limitations put in place to entry that 
ultimately would reduce that competition, then that can reduce 
the revenue, not only to build out an interoperable network for 
our first responders, but also to pay down the deficit.
    So when you are looking at that, are you thinking about 
that in addition to all the interest you are getting from the 
people that will hopefully be coming to bid, but also are you 
thinking about the fact that you need to make sure that 
yielding the most revenue was a big component of this Act 
passing so that we can reduce the deficit?
    Mr. Epstein. Yes, Congressman, we are looking at that as a 
major goal. We are also looking at the overall statute, which 
has a series of goals and I think as many people have stated 
here, many Congress people have stated here today, it is a 
balancing act but the goal that you point out, of course, is an 
extremely important part of that balance that must be struck.
    Mr. Scalise. Thank you, and I would encourage you to 
continue to keep that mind in view as well.
    I want to ask both Ms. Ham and Ms. Marsh, because you have 
competing views on how that set of rules is established. I 
guess, Ms. Ham, I have trouble when you say that limitations on 
auction access will increase competition. I guess I am not 
quite understanding that, so I want to get your take, and then 
also get Ms. Marsh's comment on that as well.
    Ms. Ham. Sure. Thank you for that question. I think the 
broad participation--in the auctions that I have had experience 
with where you had broad participation, so you have a lot of 
bidders bidding on a lot of markets, those are the healthy 
auctions that are going to raise revenue, OK? Plain and simple. 
I think T-Mobile, together with large regional carriers that 
submitted the letter today all are calling for limits, OK, 
because they believe that it will make it more likely that they 
will participate than if you don't have those limits. So 
reasonable limits--and again, I think T-Mobile is not 
suggesting excluding AT&T and Verizon, OK, understanding they 
have 80 percent of the low band spectrum today, OK, we are not 
saying exclude them, we are saying give other people a shot at 
this very important spectrum, OK----
    Mr. Scalise. So if I could get Ms. Marsh's----
    Ms. Ham. And we think getting strong competition in the 
auction is the way to raise the revenues.
    Mr. Scalise. Thanks. Ms. Marsh?
    Ms. Marsh. Yes. I think to understand what is going to 
happen at this auction, we don't need to go back to the PCS 
auction. We should look at what happened in the last major 
auction, the 700 megahertz auction. There, there were 214 
qualified bidders, and of those--and it was an open 
participation auction. No one was limited or excluded in any 
way. One hundred and one bidders won licenses at that auction 
and even though it was a difficult economic climate at the 
time, revenues exceeded congressional expectations by over $10 
billion. An open auction can succeed and produce a diversity of 
winners. Now Mr. Feld suggested a lot of companies were shut 
out. Let me point to a couple of companies who signed the 
letter that Ms. Ham just referred to that won significant 
spectrum at that auction. DISH won 168 licenses, including 
spectrum covering most of the United States. King Street 
Wireless, who is partnered with U.S. Cellular, deploy LTE 
services in 700 megahertz, was the fourth largest winner in 
that auction a megahertz POPS basis. C Spire, who is also 
deploying LTE services in its territory, was the tenth largest 
winner. An open auction with full participation can result in a 
diversity of bidders, and it will maximize revenues consistent 
with congressional intent.
    If I have a moment, I would also like to respond to some of 
the comments made about low band spectrum. There has been a lot 
of discussion about the importance of this auction because it 
is low band spectrum. In a broadband world it is about 
capacity, and capacity is driven by two things: the width of 
the band you can put together, regardless of where it sits, it 
is about how wide the channels are and how dense you build the 
network. And that type of environment, it is not about low band 
or high band spectrum. It is about putting together wide band 
spectrum and building very dense networks, and any advantage 
that may have been perceived from the low band spectrum in a 
voice world is very much negated in a broadband world, where it 
is really about capacity and not coverage.
    Mr. Scalise. Well thanks. I appreciate your testimony and 
look forward to a successful spectrum auction. I do want to 
mention that the broadcasters ought to be treated fairly, 
because they are an active participant in this--sometimes may 
be inactive--but they ought to be treated fairly and the impact 
it will have on them. I know FCC is looking at that as well. 
And with that, Mr. Chairman, I yield back the balance of my 
time.
    Mr. Walden. Gentleman yields back, and I would like to ask 
unanimous consent to enter into the record a letter from the 
Telecommunications Industry Association, the leading trade 
association with global manufacturers, vendors, and suppliers 
of information communications technology, supporting broad 
auction participation and maximizing licensed spectrum. Without 
objection, that will be entered into the record.
    [The information appears at the conclusion of the hearing.]
    Mr. Walden. I think that concludes our hearing for today. 
We really appreciate your testimony, your counsel, the work 
that you are doing. Obviously there are some issues that still 
need to be resolved. We took note of that, but we commend you 
as you move forward to work this out so we have a successful 
auction, so we continue to be the generator of innovation and 
new technologies, and generate some revenue to pay for first 
responders and lower our deficit.
    Ms. Ham. Thank you.
    Ms. Eshoo. Mr. Chairman, may I ask----
    Mr. Walden. Yes.
    Ms. Eshoo. Just I would like to thank you for the 
excellence of this hearing, and bringing together the witnesses 
that we have here today. Very important. You have all been 
instructive, and bravo, Mr. Chairman. So this is really 
enlightening for the subcommittee, and I am very pleased that 
there are two women.
    Ms. Ham. Go girl.
    Ms. Eshoo. Even though they don't agree with each other, 
two women in very high positions in very important American 
companies, so thank you again, Mr. Chairman.
    Mr. Walden. It is a team effort, as you know, organizing 
our panel, so we appreciate you and your staff's work as well.
    And with that, we will stand adjourned.
    [Whereupon, at 12:25 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                 Prepared statement of Hon. Fred Upton

    It has been nearly a year and a half since the Middle Class 
Tax Relief and Job Creation Act of 2012 was signed into law--
important legislation that included a provision granting the 
FCC the authority to conduct a broadcast television spectrum 
incentive auction. This unique auction not only fulfills long 
standing recommendations to create a nationwide public safety 
network, but it also helps to meet the soaring demand for 
commercial mobile broadband services. This auction has the 
potential to create jobs, spur innovation and breakthrough 
technologies, and make a substantial down payment toward the 
national debt. However, in order for the auction to succeed, 
the FCC must resolve several concerns that both stakeholders 
and my colleagues here in Congress have regarding the 
implementation of the law. We continue to exercise our 
oversight role in the effort to keep the auction on track as 
intended.
    As the FCC works to implement this law, it must ensure 
coordination of television stations along the borders with 
Mexico and Canada. My home state of Michigan is particularly 
affected by this which is why earlier this year I was joined by 
my friend, Chairman Emeritus Dingell, and the entire Michigan 
Congressional delegation, in a letter to the FCC expressing our 
concerns. If we fail to get border coordination right, the 
consequences will be less spectrum cleared for auction and less 
money to pay for the nationwide public safety network and the 
reduction of our national debt. It is critical that we get the 
coordination done, and done before we ask broadcasters to take 
a leap of faith in the incentive auction.
    In addition to the important border issues that must be 
resolved, robust and unfettered competition among bidders is a 
critical element needed for a successful auction. The FCC must 
not pick winners and losers by excluding certain parties from 
the auction or constraining parties' ability to bid. Doing so 
would not only reduce revenues but also violate the statute.
    We only have one shot to make this auction successful. 
Incentive auctions are capable of driving incredible 
technological and economic benefits. Let's make sure we do it 
right.




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