[House Report 107-443]
[From the U.S. Government Publishing Office]



107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     107-443

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



 
                       AUCTION REFORM ACT OF 2002

                                _______
                                

  May 7, 2002.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Tauzin, from the Committee on Energy and Commerce, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 4560]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 4560) to eliminate the deadlines for spectrum 
auctions of spectrum previously allocated to television 
broadcasting, having considered the same, report favorably 
thereon without amendment and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     1
Background and Need for Legislation..............................     2
Hearings.........................................................     4
Committee Consideration..........................................     4
Committee Votes..................................................     5
Committee Oversight Findings.....................................     5
Statement of General Performance Goals and Objectives............     5
New Budget Authority, Entitlement Authority, and Tax Expenditures     5
Committee Cost Estimate..........................................     5
Congressional Budget Office Estimate.............................     5
Federal Mandates Statement.......................................     7
Advisory Committee Statement.....................................     7
Constitutional Authority Statement...............................     7
Applicability to Legislative Branch..............................     7
Section-by-Section Analysis of the Legislation...................     8
Changes in Existing Law Made by the Bill, as Reported............     8

                          Purpose and Summary

    The purpose of H.R. 4560, the Auction Reform Act of 2002, 
is to eliminate the deadlines for the auctioning of spectrum 
located in the 698-806 MHz band (700 MHz band) and the conflict 
that exists in statute regarding whether the Federal 
Communications Commission (the Commission) has the authority to 
determine when the auctioning of such spectrum should occur.
    H.R. 4560 would prevent the Commission from conducting two 
auctions (Auction #31 and Auction #44) of spectrum in the 700 
MHz band on June 19, 2002 because conducting these auctions 
would greatly undermine sound telecommunications policy and the 
proper management of our nation's electromagnetic spectrum. 
Television stations that useChannels 52-69 currently occupy the 
700 MHz band, and will do so until the digital television transition is 
complete. As a result, conducting Auctions #31 and #44 in June would 
likely prevent the spectrum from being put to its highest and best use. 
In addition, the auctions would occur before the Executive Branch 
determines whether additional spectrum will be made available for 
advanced commercial mobile services, which would prevent companies 
interested in providing such services from determining how much they 
should value spectrum in the 700 MHz band.
    H.R. 4560 has three main components. First, the bill 
removes the statutory deadlines for the receipt of revenues 
derived from the auctioning of the 700 MHz band. Second, the 
bill prohibits the Commission from commencing or conducting 
Auctions #31 and #44 on June 19, 2002. Third, H.R. 4560 
requires the Commission to report to Congress one year after 
the date of enactment regarding when the Commission intends to 
conduct Auctions #31 and #44 as well as the progress that has 
been made in the digital television transition and the 
assignment and allocation of spectrum for advanced mobile 
communications services.

                  Background and Need for Legislation

    When Congress enacted the Balanced Budget Act of 1997 (BBA 
'97), Congress directed the Commission to auction spectrum in 
the 700 MHz band for commercial use. Twenty-four MHz of 
spectrum in that band was reserved for public safety use, and 
six MHz was reserved essentially for buffers between the 
commercial users and the public safety users of the band. 
Thirty MHz was designated for commercial use in the so-called 
Upper 700 MHz band (747 MHz-806 MHz), and forty-eight MHz was 
designated for commercial use in the so-called Lower 700 MHz 
band (698 MHz-746 MHz).
    BBA '97 required the receipts from the auction of the Lower 
700 MHz band to be deposited in the Treasury by September 30, 
2002. BBA '97 also required the auction for the Upper 700 MHz 
band to commence after January 1, 2001. The Consolidated 
Appropriations Act of 2000 amended the BBA '97 to require that 
the proceeds from the Upper 700 MHz band be deposited by 
September 30, 2000.
    Despite the deadline, the Commission has postponed the 
auction of the Upper 700 MHz band five times. In 2000, when the 
Commission first delayed the auction, the agency recognized 
that it faced conflicting statutory requirements. While the 
Consolidated Appropriations Act contains the deadline for the 
deposit of receipts for the Upper 700 MHz auction, section 
309(j)(3)(E)(ii) of the Communications Act requires the 
Commission to include safeguards in auctions that, among other 
things, ``ensure that, in scheduling of any competitive bidding 
under this subsection, an adequate period is allowed * * * to 
ensure that interested parties have a sufficient time to 
develop business plans, assess market conditions, and evaluate 
the availability of equipment for the relevant services.'' The 
Commission also found that the Communications Act requires the 
agency ``to design our auction rules and procedures so as to 
manage the radio spectrum effectively and efficiently in the 
public interest.'' (Cellular Telecommunications Industry 
Association et al.'s Request for Delay of the Auction of 
Licenses in the 747-762 and 777-792 MHz Bands Scheduled for 
September 6, 2000 (Auction 31), Memorandum Opinion, FCC 00-304 
at para. 6 (rel. September 12, 2000))
    The Commission concluded that ``[i]n complying with 
conflicting statutes, and resolving those directives as we 
proceed toward an auction, we believe the Commission's primary 
goal should be to conduct an auction that is fair, efficient, 
puts the spectrum to the best use, and thereby best serves the 
public interest.'' (Cellular Telecommunications Industry 
Association et al.'s Request for Delay of the Auction of 
Licenses in the 747-762 and 777-792 MHz Bands Scheduled for 
September 6, 2000 (Auction 31), Memorandum Opinion, FCC 00-304 
at para. 11 (rel. September 12, 2000)) The Commission also 
concluded that a delay was appropriate so that bidders would 
have an adequate time to develop business plans and assess 
market conditions.
    As the Commission recognized in 2000, the agency has the 
authority to delay the auctioning of the 700 MHz band. In 
Western Coal Traffic League v. Surface Transportation Board, 
216 F. 3d 1168, 1173 (2000), the United States Court of Appeals 
for the District of Columbia (D.C.Circuit) held that federal 
agencies are permitted to ignore statutory deadlines ``where doing so 
is administratively necessary in order to realize the broader goals of 
the same statute.'' The Communications Act's goal of ensuring ``that 
interested parties have a sufficient time to develop business plans, 
assess market conditions, and evaluate the availability of equipment 
for the relevant service'' provides the Commission with the authority 
to ignore the statutory deadlines for auctioning the 700 MHz band.
    The unique dynamics of the 700 MHz band create the 
statutory conflict that exists. With most auctions, the 
spectrum for which entities bid is either unencumbered at the 
time of auction or will be unencumbered by a specific date 
shortly after the auction is held. With the 700 MHz band, on 
the other hand, the spectrum is currently occupied by 
television stations broadcasting an analog signal on Channels 
52-69. The broadcasters are not required to vacate the band 
until December 31, 2006 or when more than 85 percent of the 
television households in a particular market have access to 
digital television, whichever date is later. Thus, if the 85 
percent threshold is not exceeded in a given market, a 
television broadcaster would not be required to relinquish its 
spectrum in the 700 MHz band for conceivably long beyond 
December 31, 2006. Some Members of the Committee have expressed 
the concern that the transition to digital television has been 
slow and that many communities will not achieve 85 percent 
penetration of digital television by the end of 2006 at the 
current pace. While the Commission and industry groups have 
recently undertaken several initiatives intended to speed the 
vacation of the 700 MHz band by the broadcasters, it is not 
clear what the impact of these initiatives will be.
    This situation makes bidding on licenses in the 700 MHz 
band very difficult. The spectrum has propagation 
characteristics that make it attractive for high-speed mobile 
data operations. But it was not clear in 2000, nor is it 
clearer today, when the broadcasters will vacate the 700 MHz 
band. That makes it very difficult to develop a business plan 
involving spectrum in the band, assess the market conditions 
for use of the band, or evaluate when manufacturers would 
produce equipment for new services in a band for which there is 
no clear timetable for the exit of existing licensees.
    In addition to concerns about when the band will be 
available for mobile data services, it is not clear whether the 
700 MHz presents the optimum band in which to offer such 
services. Several other bands have been under consideration by 
the Commission and the Administration for allocation and 
assignment for third-generation wireless and other advanced 
mobile services. Some of these other bands might be better for 
companies that currently provide second-generation wireless 
services and for international harmonization purposes. But it 
is not clear whether these other bands will be made available, 
especially the 1755-1850 MHz band, which is currently occupied 
by Department of Defense and other governmental spectrum 
operations.
    Until decisions are made regarding the availability of 
these other bands, companies cannot determine the extent to 
which they should value the spectrum in the 700 MHz band. That 
band may be the best spectrum available for advanced mobile 
services. Several key decisions are not scheduled to be made 
until the Summer, however, after the 700 MHz band is currently 
scheduled to be auctioned.
    The Commission currently has the authority to delay 
Auctions #31 and #44. The agency is faced with conflicting 
statutory mandates--one that requires that the auctions occur, 
and one that requires that the Commission refrain from 
conducting the auctions at this time. When faced with such a 
conflict in statute, the Commission retains the discretion not 
to conduct the auctions. The Commission should be using this 
discretion to delay the auctions until sound telecommunications 
and spectrum management policy dictate that conducting the 
auctions is appropriate, and until the requirements of section 
309(j)(14)(C)(ii) of the Communications Act can be satisfied.
    Because the Commission intends to conduct the auctions in 
June, the Congress must act to remove any ambiguity or conflict 
in the law that gives the Commission the impression that it is 
required to conduct the auctions then. H.R. 4560 will 
accomplish that goal by stripping the deadlines from the 
relevant statutes.

                                Hearings

    The Committee on Energy and Commerce has not held hearings 
on the legislation.

                        Committee Consideration

    On Thursday, May 2, 2002, the Full Committee met in open 
markup session and ordered H.R. 4560 favorably reported to the 
House by a voice vote, a quorum being present.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House requires 
the Committee to list the recorded votes on the motion to 
report legislation and amendments thereto. There were no record 
votes taken in connection with ordering H.R. 4560 reported. A 
motion by Mr. Tauzin to order H.R. 4560 reported to the House 
was agreed to by a voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has not held oversight 
or legislative hearings on this legislation.

         Statement of General Performance Goals and Objectives

    The goal of H.R. 4560 is to prevent the Commission from 
conducting Auctions #31 and #44 until the nation's digital 
television transition and spectrum management policy dictate 
that such auctions should occur.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
4560, the Auction Reform Act of 2002, would result in no new or 
increased budget authority, entitlement authority, or tax 
expenditures or revenues.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                       Washington, DC, May 2, 2002.
Hon. W.J. ``Billy'' Tauzin,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4560, the Auction 
Reform Act of 2002.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Kathleen 
Gramp.
            Sincerely,
                                         Robert A. Sunshine
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.R. 4560--Auction Reform Act of 2002

    Summary: H.R. 4560 would repeal statutory deadlines for 
auctioning licenses for the use of some of the electromagnetic 
spectrum currently allocated to television channels 52 through 
69. The bill also would direct the Federal Communications 
Commission (FCC) to issue a report within one year after 
enactment on issues related to rescheduling the auction of 
those frequencies.
    The budgetary effects of the bill would depend on both 
actions by the FCC and economic factors. Proceeds could be 
higher than expected under current law if all of the 
frequencies are auctioned before the FCC's auction authority 
expires in 2007; but they could be lower or zero if such 
auctions are not completed by 2007. On balance, CBO estimates 
that enacting this bill would reduce expected proceeds from the 
authority to auction these frequencies. It would therefore lead 
to a net loss of receipts and thus an increase in direct 
spending of $1.4 billion over the 2003-2007 period. Because the 
bill would affect direct spending, pay-as-you-go procedures 
would apply.
    H.R. 4560 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 4560 is shown in the following table. 
The costs of this legislation fall within budget function 950 
(undistributed offsetting receipts).

----------------------------------------------------------------------------------------------------------------
                                                              By fiscal year, in millions of dollars--
                                                   -------------------------------------------------------------
                                                     2002     2003       2004       2005       2006       2007
----------------------------------------------------------------------------------------------------------------
                                           CHANGES IN DIRECT SPENDING

Channels 52-69 auction receipts:
Under current law:
    Estimated budget authority....................      0     -2,800       -600       -600          0          0
    Estimated outlays.............................      0     -2,800       -600       -600          0          0
Proposed changes:
    Estimated budget authority....................      0      2,800        600        600     -1,300     -1,300
    Estimated outlays.............................      0      2,800        600        600     -1,300     -1,300
Channels 52-69 auction receipts:
Under H.R. 4560:
    Estimated budget authority....................      0          0          0          0     -1,300     -1,300
    Estimated outlays.............................      0          0          0          0     -1,300     -1,300
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: Under current law, the spectrum 
currently allocated to television channels 52 through 69 should 
be available for new commercial uses after the television 
stations complete their expected transition from analog to 
digital broadcasting technology. CBO expects that, under 
current law, this transition will occur well after the 
statutory goal of December 31, 2006. Companies would discount 
the amount they are willing to pay for such licenses because of 
the lag between an auction and completion of the transition to 
digital television. We estimate that proceeds from the FCC's 
auction of these bands, which is scheduled to start on June 19, 
2002, would total about $4 billion under current law.
    CBO expects that repealing statutory deadlines for 
licensing these frequencies would affect auction proceeds in 
two ways. On the one hand, if all of the affected spectrum were 
auctioned at a later date, we expect that total proceeds would 
be greater than $4 billion. On the other hand, eliminating the 
statutory deadline would increase the likelihood that these 
bands would not be auctioned before the FCC's auction authority 
expires in 2007, particularly because the transition to digital 
television is likely to occur well after that point. For this 
estimate, we assume there is a 50 percent chance that auctions 
of all of the affected spectrum would be held by 2007. (If they 
do occur, proceeds would most likely be collected after 2005.) 
Our estimate of proceeds under this bill--a total of $2.6 
billion over the 2003-2012 period--reflects the net effect of 
these two factors.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. The net 
changes in outlays that are subject to pay-as-you-go procedures 
are shown in the following table. For the purposes of enforcing 
pay-as-you-go procedures, only the effects through fiscal year 
2006 are counted.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                           By fiscal year, in millions of dollars
                                                                  --------------------------------------------------------------------------------------
                                                                    2002    2003    2004   2005     2006       2007     2008   2009   2010   2011   2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in outlays...............................................      0    2,800    600    600     -1,300     -1,300      0      0      0      0      0
Changes in receipts..............................................                                      Not applicable
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector impact: H.R. 4560 
contains on intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    Estimate prepared by: Federal Costs: Kathleen Gramp; Impact 
on state, local, and tribal governments: Angela Seitz; Impact 
on the private sector: Jean Talarico.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    Section 1 establishes the short title of the bill, the 
Auction Reform Act of 2002.

Section 2. Findings

    Section 2 makes certain Congressional findings.

Section 3. Repeal of deadlines for spectrum auctions

    Section 3 repeals the statutory deadlines for the deposit 
of receipts from the auctioning of spectrum in the 700 MHz 
band.

Section 4. Termination of scheduled auctions

    Section 4 prohibits the Commission from commencing or 
conducting Auctions #31 and #44 on June 19, 2002.
    Section 4 requires that the Commission submit a report to 
Congress one year after the date of enactment that specifies 
when the Commission intends to reschedule Auctions #31 and #44 
and describes the progress that the Commission has made with 
respect to the digital television transition and the assignment 
and allocation of additional spectrum for advanced mobile 
communications services.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

             SECTION 309 OF THE COMMUNICATIONS ACT OF 1934


SEC. 309. ACTION UPON APPLICATIONS; FORM OF AND CONDITIONS ATTACHED TO 
                    LICENSES.

  (a) * * *
  (j) Use of Competitive Bidding.--
          (1) * * *

           *       *       *       *       *       *       *

          (14) Auction of recaptured broadcast television 
        spectrum.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Spectrum reversion and resale.--
                          (i) * * *
                          (ii) Licensees for new services 
                        occupying spectrum reclaimed pursuant 
                        to clause (i) shall be assigned in 
                        accordance with this subsection. [The 
                        Commission shall complete the 
                        assignment of such licenses, and report 
                        to the Congress the total revenues from 
                        such competitive bidding, by September 
                        30, 2002.]

           *       *       *       *       *       *       *

                              ----------                              


            SECTION 3007 OF THE BALANCED BUDGET ACT OF 1997


SEC. 3007. DEADLINE FOR COLLECTION.

  The Commission shall conduct the competitive bidding required 
under this title or the amendments made by this title in a 
manner that ensures that all proceeds of such bidding are 
deposited in accordance with section 309(j)(8) of the 
Communications Act of 1934 not later than September 30, 2002. 
This section shall not apply to the band of frequencies between 
698 and 806 megahertz, inclusive.
                              ----------                              


              SECTION 213 OF THE ACT OF NOVEMBER 29, 1999


   (H.R. 3425 of the 106th Congress and enacted into law by section 
                   1001(a)(5) of Public Law 106-113)

  Sec. 213. (a) Revised Schedule for Competitive Bidding of 
Spectrum.--(1) * * *
  [(2) Commencing on the date of the enactment of this Act, the 
Federal Communications Commission shall initiate the 
competitive bidding process previously required under section 
337(b)(2) of the Communications Act of 1934 (as repealed by the 
amendment made by paragraph (1)).
  [(3) The Federal Communications Commission shall conduct the 
competitive bidding process described in paragraph (2) in a 
manner that ensures that all proceeds of such bidding are 
deposited in accordance with section 309(j)(8) of the 
Communications Act of 1934 (47 U.S.C. 309(j)(8)) not later than 
September 30, 2000.]

           *       *       *       *       *       *       *


                                
