[House Report 108-137]
[From the U.S. Government Publishing Office]
108th Congress Report
1st Session HOUSE OF REPRESENTATIVES 108-137
======================================================================
COMMERCIAL SPECTRUM ENHANCEMENT ACT
_______
June 3, 2003.--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. 1320]
[Including cost estimate of the Congressional Budget Office]
The Committee on Energy and Commerce, to whom was referred
the bill (H.R. 1320) to amend the National Telecommunications
and Information Administration Organization Act to facilitate
the reallocation of spectrum from governmental to commercial
users, having considered the same, report favorably thereon
with an amendment and recommend that the bill as amended do
pass.
CONTENTS
Page
Amendment........................................................ 1
Purpose and Summary.............................................. 5
Background and Need for Legislation.............................. 6
Hearings......................................................... 7
Committee Consideration.......................................... 7
Committee Votes.................................................. 8
Committee Oversight Findings..................................... 8
Statement of General Performance Goals and Objectives............ 8
New Budget Authority, Entitlement Authority, and Tax Expenditures 8
Committee Cost Estimate.......................................... 8
Congressional Budget Office Estimate............................. 11
Federal Mandates Statement....................................... 15
Advisory Committee Statement..................................... 15
Constitutional Authority Statement............................... 15
Applicability to Legislative Branch.............................. 15
Section-by-Section Analysis of the Legislation................... 15
Changes in Existing Law Made by the Bill, as Reported............ 20
Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Commercial Spectrum Enhancement Act''.
SEC. 2. RELOCATION OF ELIGIBLE FEDERAL ENTITIES FOR THE REALLOCATION OF
SPECTRUM FOR COMMERCIAL PURPOSES.
Section 113(g) of the National Telecommunications and Information
Administration Organization Act (47 U.S.C. 923(g)) is amended by
striking paragraphs (1) through (3) and inserting the following:--
``(1) Eligible federal entities.--Any Federal entity that
operates a Federal Government station assigned to a band of
frequencies specified in paragraph (2) and that incurs
relocation costs because of the reallocation of frequencies
from Federal use to non-Federal use shall receive payment for
such costs from the Spectrum Relocation Fund, in accordance
with section 118 of this Act. For purposes of this paragraph,
Federal power agencies exempted under subsection (c)(4) that
choose to relocate from the frequencies identified
forreallocation pursuant to subsection (a), are eligible to receive
payment under this paragraph.
``(2) Eligible frequencies.--The bands of eligible
frequencies for purposes of this section are as follows:
``(A) the 216-220 megahertz band, the 1432-1435
megahertz band, the 1710-1755 megahertz band, and the
2385-2390 megahertz band of frequencies; and
``(B) any other band of frequencies reallocated from
Federal use to non-Federal use after January 1, 2003,
that is assigned by competitive bidding pursuant to
section 309(j) of the Communications Act of 1934 (47
U.S.C. 309(j)), except for bands of frequencies
previously identified by the National
Telecommunications and Information Administration in
the Spectrum Reallocation Final Report, NTIA Special
Publication 95-32 (1995).
``(3) Definition of relocation costs.--For purposes of this
subsection, the term `relocation costs' means the costs
incurred by a Federal entity to achieve comparable capability
of systems, regardless of whether that capability is achieved
by relocating to a new frequency assignment or by utilizing an
alternative technology. Such costs include--
``(A) the costs of any modification or replacement of
equipment, software, facilities, operating manuals,
training costs, or regulations that are attributable to
relocation;
``(B) the costs of all engineering, equipment,
software, site acquisition and construction costs, as
well as any legitimate and prudent transaction expense,
including outside consultants, and reasonable
additional costs incurred by the Federal entity that
are attributable to relocation, including increased
recurring costs associated with the replacement
facilities;
``(C) the costs of engineering studies, economic
analyses, or other expenses reasonably incurred in
calculating the estimated relocation costs that are
provided to the Commission pursuant to paragraph (4) of
this subsection;
``(D) the one-time costs of any modification of
equipment reasonably necessary to accommodate
commercial use of such frequencies prior to the
termination of the Federal entity's primary allocation
or protected status, when the eligible frequencies as
defined in paragraph (2) of this subsection are made
available for private sector uses by competitive
bidding and a Federal entity retains primary allocation
or protected status in those frequencies for a period
of time after the completion of the competitive bidding
process; and
``(E) the costs associated with the accelerated
replacement of systems and equipment if such
acceleration is necessary to ensure the timely
relocation of systems to a new frequency assignment.
``(4) Notice to commission of estimated relocation costs.--
``(A) The Commission shall notify the NTIA at least
18 months prior to the commencement of any auction of
eligible frequencies defined in paragraph (2). At least
6 months prior to the commencement of any such auction,
the NTIA, on behalf of the Federal entities and after
review by the Office of Management and Budget, shall
notify the Commission of estimated relocation costs and
timelines for such relocation.
``(B) Upon timely request of a Federal entity, the
NTIA shall provide such entity with information
regarding an alternative frequency assignment or
assignments to which their radiocommunications
operations could be relocated for purposes of
calculating the estimated relocation costs and
timelines to be submitted to the Commission pursuant to
subparagraph (A).
``(C) To the extent practicable and consistent with
national security considerations, the NTIA shall
provide the information required by subparagraphs (A)
and (B) by the geographic location of the Federal
entities' facilities or systems and the frequency bands
used by such facilities or systems.
``(5) Notice to congressional committees and gao.--The NTIA
shall, at the time of providing an initial estimate of
relocation costs to the Commission under paragraph (4)(A),
submit to the Committees on Appropriations and Energy and
Commerce of the House of Representatives, the Committees on
Appropriations and Commerce, Science, and Transportation of the
Senate, and the Comptroller General a copy of such estimate and
the timelines for relocation.
``(6) Implementation of procedures.--The NTIA shall take such
actions as necessary to ensure the timely relocation of Federal
entities' spectrum-related operations from frequencies defined
in paragraph (2) to frequencies or facilities of comparable
capability. Upon a finding by the NTIA that a Federal entity
has achieved comparable capability of systems by relocating to
a new frequency assignment or by utilizing an alternative
technology, the NTIA shall terminate the entity's authorization
and notify the Commission that the entity's relocation has been
completed. The NTIA shall also terminate such entity's
authorization if the NTIA determines that the entity has
unreasonably failed to comply with the timeline for relocation
submitted by the Director of the Office of Management and
Budget under section 118(d)(2)(B).''.
SEC. 3. MINIMUM AUCTION RECEIPTS AND DISPOSITION OF PROCEEDS.
(a) Auction Design.--Section 309(j)(3) of the Communications Act of
1934 (47 U.S.C. 309(j)(3)) is amended--
(1) by striking ``and'' at the end of subparagraph (D);
(2) by striking the period at the end of subparagraph (E) and
inserting ``; and''; and
(3) by adding at the end the following new subparagraph:
``(F) for any auction of eligible frequencies
described in section 113(g)(2) of the National
Telecommunications and Information Administration
Organization Act (47 U.S.C. 923(g)(2)), the recovery of
110 percent of estimated relocation costs as provided
to the Commission pursuant to section 113(g)(4) of such
Act.''.
(b) Special Auction Provisions for Eligible Frequencies.--Section
309(j) of such Act is further amended by adding at the end the
following new paragraph:
``(15) Special auction provisions for eligible frequencies.--
``(A) Special regulations.--The Commission shall
revise the regulations prescribed under paragraph
(4)(F) of this subsection to prescribe methods by which
the total cash proceeds from any auction of eligible
frequencies described in section 113(g)(2) of the
National Telecommunications and Information
Administration Organization Act (47 U.S.C. 923(g)(2))
shall at least equal 110 percent of the total estimated
relocation costs provided to the Commission pursuant to
section 113(g)(4) of such Act.
``(B) Conclusion of auctions contingent on minimum
proceeds.--The Commission shall not conclude any
auction of eligible frequencies described in section
113(g)(2) of such Act if the total cash proceeds
attributable to such spectrum are less than 110 percent
of the total estimated relocation costs provided to the
Commission pursuant to section 113(g)(4) of such Act.
If the Commission is unable to conclude an auction for
the foregoing reason, the Commission shall cancel the
auction, return within 45 days after the auction
cancellation date any deposits from participating
bidders held in escrow, and absolve such bidders from
any obligation to the United States to bid in any
subsequent reauction of such spectrum.
``(C) Authority to issue prior to deauthorization.--
In any auction conducted under the regulations required
by subparagraph (A), the Commission may grant a license
assigned for the use of eligible frequencies prior to
the termination of an eligible Federal entity's
authorization. However, the Commission shall condition
such license by requiring that the licensee cannot
cause harmful interference to such Federal entity until
such entity's authorization has been terminated by the
National Telecommunications and Information
Administration.''.
(c) Deposit of Proceeds.--Paragraph (8) of section 309(j) of the
Communications Act of 1934 (47 U.S.C. 309(j)) is amended--
(1) in subparagraph (A), by inserting ``or subparagraph (D)''
after ``subparagraph (B)''; and
(2) by adding at the end the following new subparagraph:
``(D) Disposition of cash proceeds.--Cash proceeds
attributable to the auction of any eligible frequencies
described in section 113(g)(2) of the National
Telecommunications and Information Administration
Organization Act (47 U.S.C. 923(g)(2)) shall be
deposited in the Spectrum Relocation Fund established
under section 118 of such Act, and shall be available
in accordance with that section.''.
SEC. 4. ESTABLISHMENT OF FUND AND PROCEDURES.
Part B of the National Telecommunications and Information
Administration Organization Act is amended by adding after section 117
(47 U.S.C. 927) the following new section:
``SEC. 118. SPECTRUM RELOCATION FUND.
``(a) Establishment of Spectrum Relocation Fund.--There is
established on the books of the Treasury a separate fund to be known as
the `Spectrum Relocation Fund' (in this section referred to as the
`Fund'), which shall be administered by theOffice of Management and
Budget (in this section referred to as `OMB'), in consultation with the
NTIA.
``(b) Crediting of Receipts.--The Fund shall be credited with the
amounts specified in section 309(j)(8)(D) of the Communications Act of
1934 (47 U.S.C. 309(j)(8)(D)).
``(c) Used To Pay Relocation Costs.--The amounts in the Fund from
auctions of eligible frequencies are authorized to be used to pay
relocation costs, as defined in section 113(g)(3) of this Act, of an
eligible Federal entity incurring such costs with respect to relocation
from those frequencies.
``(d) Fund Availability.--
``(1) Appropriation.--There are hereby appropriated from the
Fund such sums as are required to pay the relocation costs
specified in subsection (c).
``(2) Transfer conditions.--None of the funds provided under
this subsection may be transferred to any eligible Federal
entity--
``(A) unless the Director of OMB has determined, in
consultation with the NTIA, the appropriateness of such
costs and the timeline for relocation; and
``(B) until 30 days after the Director of the OMB has
submitted to the Committees on Appropriations and
Energy and Commerce of the House of Representatives,
the Committees on Appropriations and Commerce, Science,
and Transportation of the Senate, and the Comptroller
General a detailed plan describing how the sums
transferred from the Fund will be used to pay
relocation costs in accordance with such subsection and
the timeline for such relocation.
``(3) Reversion of unused funds.--Any auction proceeds in the
Fund that are remaining after the payment of the relocation
costs that are payable from the Fund shall revert to and be
deposited in the general fund of the Treasury not later than 8
years after the date of the deposit of such proceeds to the
Fund.
``(e) Transfer to Eligible Federal Entities.--
``(1) Transfer.--
``(A) Amounts made available pursuant to subsection
(d) shall be transferred to eligible Federal entities,
as defined in section 113(g)(1) of this Act.
``(B) An eligible Federal entity may receive more
than one such transfer, but if the sum of the
subsequent transfer or transfers exceeds 10 percent of
the original transfer--
``(i) such subsequent transfers are subject
to prior approval by the Director of OMB as
required by subsection (d)(2)(A);
``(ii) the notice to the committees
containing the plan required by subsection
(d)(2)(B) shall be not less than 45 days prior
to the date of the transfer that causes such
excess above 10 percent;
``(iii) such notice shall include, in
addition to such plan, a explanation of need
for such subsequent transfer or transfers; and
``(iv) the Comptroller General shall, within
30 days after receiving such plan, review such
plan and submit to such committees an
assessment of the explanation for the
subsequent transfer or transfers.
``(C) Such transferred amounts shall be credited to
the appropriations account of the eligible Federal
entity which has incurred, or will incur, such costs,
and shall, subject to paragraph (2), remain available
until expended.
``(2) Retransfer to fund.--An eligible Federal entity that
has received such amounts shall report its expenditures to OMB
and shall transfer any amounts in excess of actual relocation
costs back to the Fund immediately after the NTIA has notified
the Commission that the entity's relocation is complete, or has
determined that such entity has unreasonably failed to complete
such relocation in accordance with the timeline required by
subsection (d)(2)(A).''.
SEC. 5. TELECOMMUNICATIONS DEVELOPMENT FUND.
Section 714(f) of the Communications Act of 1934 (47 U.S.C. 614(f))
is amended to read as follows:
``(f) Lending and Credit Operations.--Loans or other extensions of
credit from the Fund shall be made available to an eligible small
business on the basis of--
``(1) the analysis of the business plan of the eligible small
business;
``(2) the reasonable availability of collateral to secure the
loan or credit extension;
``(3) the extent to which the loan or credit extension
promotes the purposes of this section; and
``(4) other lending policies as defined by the Board.''.
SEC. 6. CONSTRUCTION.
Nothing in this Act is intended to modify section 1062(b) of the
National Defense Authorization Act for Fiscal Year 2000 (Public Law
106-65).
SEC. 7. ANNUAL REPORT.
The National Telecommunications and Information Administration shall
submit an annual report to the Committees on Appropriations and Energy
and Commerce of the House of Representatives, the Committees on
Appropriations and Commerce, Science, and Transportation of the Senate,
and the Comptroller General on--
(1) the progress made in adhering to the timelines applicable
to relocation from eligible frequencies required under section
118(d)(2)(A) of the National Telecommunications and Information
Administration Organization Act, separately stated on a
communication system-by-system basis and on an auction-by-
auction basis; and
(2) with respect to each relocated communication system and
auction, a statement of the estimate of relocation costs
required under section 113(g)(4) of such Act, the actual
relocations costs incurred, and the amount of such costs paid
from the Spectrum Relocation Fund.
SEC. 8. PRESERVATION OF AUTHORITY; NTIA REPORT REQUIRED.
(a) Spectrum Management Authority Retained.--Except as provided with
respect to the bands of frequencies identified in section 113(g)(2)(A)
of National Telecommunications and Information Administration
Organization Act (47 U.S.C. 923(g)(2)(A)) as amended by this Act,
nothing in this Act or the amendments made by this Act shall be
construed as limiting the Federal Communications Commission's authority
to allocate bands of frequencies that are reallocated from Federal use
to non-Federal use for unlicensed, public safety, shared, or non-
commercial use.
(b) NTIA Report Required.--Within 1 year after of the date of
enactment of this Act, the Administrator of the National
Telecommunications and Information Administration shall submit to the
Energy and Commerce Committee of the House of Representatives and the
Commerce, Science, and Transportation Committee of the Senate a report
on various policy options to compensate Federal entities for relocation
costs when such entities' frequencies are allocated by the Commission
for unlicensed, public safety, shared, or non-commercial use.
Purpose and Summary
The purpose of H.R. 1320, the Commercial Spectrum
Enhancement Act of 2003, is to provide a clear, predictable
mechanism for compensating federal entities that move their
spectrum operations from frequencies that are reallocated from
government to non-government use.
H.R. 1320 provides federal government spectrum licensees
that incur relocation costs because of the reallocation of
spectrum bands from government to non-government use with the
authority to receive reimbursement for their relocation costs
from the Spectrum Relocation Fund (SRF). H.R. 1320 defines
relocation costs as expenses that are incurred by federal
government agencies in order to achieve comparable capability
of systems. This means that a federal spectrum operation moved
to a different band will be reimbursed for all costs necessary
to prevent that operation from experiencing any degradation in
service or capability. In addition, the agency would be
reimbursed for utilizing a different technology (such as
wireline communications) rather than relocating to a different
spectrum band.
H.R. 1320 requires the Federal Communications Commission
(the Commission) to notify the National Telecommunications and
Information Administration (NTIA) eighteen months before
conducting an auction of reallocated spectrum. The purpose of
this notification is so that NTIA, after review by the Office
of Management and Budget (OMB), can provide the Commission with
an estimate of relocation costs for a particular band and a
timeline for relocation. This information is critical because,
under the legislation, an FCC auction of reallocated spectrum
is only valid if the auction yields proceeds of at least 110
percent of the estimated relocation costs.
The proceeds from auctions of eligible reallocated bands
are deposited in the SRF, which is an OMB-administered separate
fund at the Treasury. If any agency has any transferred money
remaining when relocation is complete, the agency is required
to transfer the funds back to the SRF immediately. Unexpended
auction proceeds are transferred to the Treasury no later than
eight years after the proceeds were initially deposited in the
SRF.
Background and Need for Legislation
Spectrum is the basic building block for any wireless
service. Spectrum has therefore become an increasingly valuable
asset to government and commercial entities. Government
operations, especially defense-related operations, are
increasingly reliant upon spectrum. The most recent military
conflict in Iraq demonstrated that the armed forces rely on
spectrum for a significant amount of tactical operations and
intelligence gathering.
Commercial mobile radio services have proliferated in the
United States, where there are more than 140 million wireless
subscribers. While voice services currently represent the vast
majority of commercial mobile radio services, consumers have
been using mobile data services at an increasing rate. However,
mobile data services are generally offered at bit-rate speeds
that prevent consumers from using these services to access
video and data applications that require significant bandwidth.
Advanced mobile data services, also known as third-
generation mobile services, will present consumers with the
ability to access exciting new applications. These applications
will provide consumers with enhanced opportunities to
communicate, work, learn, shop, and entertain themselves in a
mobile environment. However, commercial mobile radio service
providers need additional spectrum in order to provide
consumers with these services so that new data services are not
offered at the expense of the quality of service and network
reliability of existing services.
Making additional spectrum available for commercial use
that has the propagation characteristics necessary for advanced
mobile services is therefore critical, although the propagation
characteristics limit the number of spectrum bands on which
advanced services can operate. In addition, certain spectrum
bands are more desirable because they present opportunities for
global harmonization of the frequencies used for advanced
mobile services. The federal government currently conducts
spectrum operations on certain spectrum bands that would be
ideal for such services.
Existing law rightly prohibits spectrum from simply being
taken from federal agencies and made available for commercial
use. Specifically, the Strom Thurmond National Defense
Authorization Act for Fiscal Year 1999 (Strom Thurmond Act)
requires an auction winner that wants to use spectrum
reallocated from government to non-government use to reimburse
a federal entity for costs incurred in the process of
relocating the federal entity's spectrum operations to a
different spectrum band. Under the Strom Thurmond Act, after a
commercial entity wins an auction for a particular license of
spectrumreallocated from government to non-government use, a
commercial entity has to negotiate with the government entity to
determine the cost and timeline for relocation of the government
entity's spectrum operations. Furthermore, with certain exceptions, the
National Defense Authorization Act of 2000 prohibits the surrender of
spectrum by the Department of Defense unless comparable spectrum is
made available, in advance, for the relevant operations. The Secretary
of Commerce, Secretary of Defense, and the Chairman of the Joint Chiefs
of Staff must jointly certify that the alternative band (or bands)
provides comparable capability.
As a result, a potential licensee has to pay twice--once to
win the auction for the license and again to pay to relocate
any government operations in the band. In addition, the federal
agency occupying the band has complete control over when it
would relocate its spectrum operations. This system provides
potential licensees with little incentive to participate in
auctions of reallocated government spectrum.
H.R. 1320 attempts to remedy this problem by establishing a
relocation fund for moving the spectrum operations of affected
federal entities. Under H.R. 1320, proceeds from auctions of
spectrum reallocated from government to non-government use are
deposited directly into the SRF, instead of being deposited
into the general fund of the Treasury. Affected federal
entities draw from the SRF to pay for their relocation costs.
H.R. 1320 creates certainty for both federal agencies and
potential commercial licensees. The legislation creates
certainty for federal entities required to relocate their
spectrum operations that they will be fully compensated for
their relocation expenses. In addition, H.R. 1320 creates
certainty for potential commercial licensees because they will
have a clear understanding, prior to an auction and throughout
the relocation process, of the cost of relocating federal
spectrum operations and of the timelines for relocating such
operations.
Hearings
The Subcommittee on Telecommunications and the Internet
held a hearing on H.R. 1320 on March 25, 2003. The Subcommittee
received testimony from: Nancy Victory, Assistant Secretary of
Commerce for Communications and Information; Stephen Price,
Deputy Assistant Secretary of Defense for Spectrum, Space,
Sensors and C3 Policy; Steve Berry, Senior Vice President for
Government Affairs, Cellular Telecommunications and Internet
Association; and Larry Grossman, Co-Chairman, Digital Promise
Project.
Committee Consideration
On Wednesday, April 9, 2003, the Subcommittee on
Telecommunications and the Internet met in open markup session
and approved H.R. 1320 for Full Committee consideration, as
amended, by a voice vote, a quorum being present. On Wednesday,
April 30, 2003, the Full Committee met in open markup session
and ordered H.R. 1320 favorably reported to the House, as
amended, by a voice vote, a quorum being present.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto.
There were no record votes taken in connection with ordering
H.R. 1320 reported. A motion by Mr. Tauzin to order H.R. 1320
reported to the House, as amended, was agreed to by a voice
vote. Chairman Tauzin asked for and received unanimous consent
to make technical and conforming changes to the bill.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee held a legislative
hearing and made findings that are reflected in this report.
Statement of General Performance Goals and Objectives
The goal of H.R. 1320 is to make spectrum used by federal
agencies available for advanced commercial mobile radio
services and to compensate the affected federal agencies for
relocating their spectrum operations.
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.
1320, the Commercial Spectrum Enhancement Act of 2003, would
result in changes to budget authority, entitlement authority,
and tax expenditures and revenues to the extent stated below in
the Committee Cost Estimate.
Committee Cost Estimate
The Congressional Budget Office (CBO) analysis of the
budgetary impact of H.R. 1320 fails to adequately consider the
impact of this legislation on projected auction receipts and
spending for the relocation of the spectrum operations of
federal entities. CBO estimates that ``implementing H.R. 1320
would increase net direct spending by $1.4 billion over the
2006-2008 period and by $2.5 billion over the next 10 years.''
According to CBO, enactment of this legislation has no
measurable effect on projected auction proceeds.
The Committee strongly disagrees with CBO's analysis.
Enactment of H.R. 1320 should increase net revenues to the
federal government over 5 and 10 years. The Committee also
believes that H.R. 1320 imposes greater fiscal discipline on
eligible federal entities than CBO anticipates.
The CBO baseline estimate for the 90 MHz 3G auction assumes
that the federal government will collect $15 billion--59 cents/
MHz/pop--in auction receipts. CBO's analysis states, ``This
estimate reflects our expectation that companies will discount
their bids by about $2 billion to $3 billion [roughly 15%]
because of the uncertainty associated with the time and cost of
relocating federal and commercial users.'' Based on that
statement. CBO must assume that the market value of the 3G
spectrum will be $17-18 billion or 67-71 cents/MHz/pop in 2006
when CBO expects the 3G auction to occur.
The current market value of spectrum is significantly
higher. Verizon Wireless purchased PCS licenses from Northcoast
Communications in April of 2003 for $750 million, which
translates into a market value of $1.58/MHz/pop. While the
spectrum purchased by Verizon is comparable in propagation
characteristics to the spectrum that will be included in the 3G
auction, it is important to note some differences in the
licenses. The Northcoast licenses were assigned on an MTA/BTA
basis, which means that the licenses represent limited
geographic areas. On the other hand, the 3G spectrum licenses
are expected to be a mixture of national, super-regional and
limited-geographic area licenses, which means that many of the
3G spectrum licenses will be much more valuable than the
Northcoast licenses. In addition, the 3G spectrum will be used
for services that the Committee expects will yield much higher
revenues than current-generation services. Nonetheless, CBO's
market valuation estimate for the 3G spectrum, for an auction
that will probably occur in 2006, is less than half of current
market value for spectrum used for existing mobile services.
Based on the Northcoast transaction, the current market
value for 90 MHz of spectrum is in the $25-40 billion range.
Even with CBO's 15% uncertainty discount (the Committee
strongly disagrees with the application of this discount to the
auction assuming that H.R. 1320 is enacted into law), the 3G
auction should yield $21-34 billion in 2006. At those levels,
enactment of H.R. 1320 would increase projected auction
receipts by $6-19 billion over the 2006-2008 period and
increase net revenues to the federal government by $3.5-16.5
billion over the next 10 years relative to the CBO baseline.
CBO acknowledges that ``simplifying the reimbursement
process could reduce some of the uncertainty for bidders, which
could result in higher auction proceeds.'' But their analysis
concludes that the ``magnitude of any change would be small
relative to other factors that will affect the market value of
these frequencies.'' H.R. 1320 does much more than just
simplify the reimbursement process. It significantly reduces
the financial risks in the current relocation process for
potential bidders and for federal agencies.
Under current law, a winning bidder at an FCC spectrum
auction begins negotiating with federal entities with
operations in the auctioned bands after the bidder wins the
license at auction. Thus, a winning bidder pays twice--once at
auction and again if and when it reaches an agreement with a
federal entity regarding the cost and timeline for relocation
of federal spectrum operations. This cumbersome two-step
process contains a number of risks for prospective bidders and
for federal entities, particularly when national security
interests are involved. In addition, under current law, an
auction winner cannot spend all of its money at auction.
Instead, an auction winner must save some money allocated to
spectrum acquisition for paying government agencies to relocate
their spectrum operations.
H.R. 1320 eliminates the uncertainty over the additional
cost of federal relocation for prospective bidders. Bidders pay
once, at the auction, and have no financial liability to pay
for relocation other than what they pay at auction. Bidders
also receive information about federal relocation costs and
schedules well before each auction occurs. In addition, bidders
are held harmless for any federal relocation cost overruns. The
bill further reduces the uncertainty associated with the timing
of the relocation process with increased reporting requirements
and oversight by Office of Management and Budget (OMB),
Congress, and the General Accounting Office (GAO).
Under H.R. 1320's improved process, bidders should pay much
closer to market value for spectrum than under current law. The
risk discount that CBO applies to the auction under current law
cannot logically be applied to the auction after enactment of
H.R. 1320. Reducing the CBO's uncertainty discount by 50% would
increase CBO's estimate of the 3G auction proceeds to roughly
$16.5 billion. Using CBO's below-market spectrum valuations,
that change alone would make enactment of H.R. 1320 a net
revenue-raiser for the federal government over the 2006-2008
period. However, based on current market values and a reduced
uncertainty discount for prospective bidders, the 3G auction
should raise $23-37 billion. These assumptions would increase
projected auction proceeds by $8-22 billion over the 2006-2008
period and increase net projected revenues to the federal
government by $5.5-19.5 billion over the next 10 years relative
to the CBO baseline.
H.R. 1320 also imposes cost-controls that the Committee
believes will ensure that government agencies are accountable
for their relocation expenses. H.R. 1320 creates third-party
review of federal agency relocation estimates and timetables by
National Telecommunications and Information Administration
(NTIA), OMB, Congress and GAO. The bill also requires annual
relocation progress reports to Congress that will detail
whether cost overruns are occurring. These requirements should
result in a more-orderly relocation process, reduce the
likelihood of cost overruns, accelerate planned federal
relocations, and decrease the future costs of maintaining
outdated Department of Defense and other federal communications
systems operating in bands with increasing global commercial
interference problems.
Even more importantly, section 4 of H.R. 1320 stipulates
that no funds may be transferred from the Spectrum Relocation
Fund to a federal entity until 30 days after the Director of
OMB, in consultation with NTIA, has determined the
appropriateness of an agency's relocations costs and timeline
for relocation, and the Director of OMB has submitted a
relocation plan to Congress and GAO containing detailed
relocation cost estimates and timelines. Section 4 requires
that OMB, in consultation with NTIA, must approve any
subsequent transfer exceeding 10 percent of the first transfer
to the agency and notify Congress and GAO 45 days in advance of
the proposed transfer. It also requires that GAO review the
proposed transfer and submit its assessment to Congresswithin
30 days. These notification requirements will provide Congress with a
sufficient amount of time to address concerns Congress may have
regarding how an agency plans to spend relocation funds.
For the foregoing reasons, the Committee believes that its
estimate more accurately reflects the fiscal impact associated
with the enactment of H.R. 1320 than the CBO estimate reprinted
below.
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 13, 2003.
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. 1320, the
Commercial Spectrum Enhancement Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Kathleen
Gramp.
Sincerely,
Douglas Holtz-Eakin,
Director.
Enclosure.
H.R. 1320--Commercial Spectrum Enhancement Act
Summary: H.R. 1320 would amend the procedures used to pay
for relocating federal telecommunications systems that use
electromagnetic spectrum that will be licensed for commercial
use. It would simplify the process companies use to reimburse
the government for relocation costs and would allow agencies to
spend those funds without further appropriation. Under current
law, such spending is subject to appropriation. In addition,
the bill would amend existing law regarding loans made by the
Telecommunications Development Fund (TDF).
CBO estimates that implementing H.R. 1320 would increase
net direct spending by $1.4 billion over the 2006-2008 period
and by $2.5 billion over the next 10 years. Allowing agencies
to directly spend some auction proceeds would eliminate the
need to appropriate funds for relocation costs. Consequently,
this increase in direct spending could be largely offset by a
reduction in discretionary spending if the total amounts
appropriated in future years are reduced correspondingly.
H.R. 1320 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. 1320 is shown in the following table.
The costs of this legislation fall primarily within budget
functions 050 (national defense) and 905 (undistributed
offsetting receipts).
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year (in billions of dollars)
----------------------------------------------------------------------------------------
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING
Spectrum auction receipts under current law:
Estimated budget authority................................. -0.1 -0.3 -8.0 -8.0 -2.8 -2.5 0 0 0 0 0
Estimated outlays.......................................... -0.1 -0.3 -8.0 -8.0 -2.8 -2.5 0 0 0 0 0
Proposed changes:
Delay of spectrum auctions:
Estimated budget authority............................. 0 0 7.5 -7.5 0 0 0 0 0 0 0
Estimated outlays...................................... 0 0 7.5 -7.5 0 0 0 0 0 0 0
Spnding for relocation costs \1\:
Estimated budget authority............................. 0 0 0 2.5 0 0 0 0 0 0 0
Estimated outlays...................................... 0 0 0 0.3 0.5 0.6 0.6 0.3 0.1 0.1 0
Total proposed changes:
Estimated budget authority............................. 0 0 7.5 -5.0 0 0 0 0 0 0 0
Estimated outlays...................................... 0 0 7.5 -7.2 0.5 0.6 0.6 0.3 0.1 0.1 0
Net spectrum auction receipts under H.R. 1320:
Estimated budget authority................................. -0.1 -0.3 -0.5 -13.0 -2.8 -2.5 0 0 0 0 0
Estimated outlays.......................................... -0.1 -0.3 -0.5 -15.2 -2.3 -1.9 0.6 0.3 0.1 0.1 0
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Implementing H.R. 1320 could result in a reduction in discretionary spending, similar to the $2.5 billion increase in direct spending if the total
amounts appropriated in future years are reduced accordingly.
Basis of Estimate
H.R. 1320 would amend current law that governs auctions of
the electromagnetic spectrum in two ways. First, it would
change the process used to pay for the cost of relocating
government operations when spectrum that is used by agencies is
going to be reallocated and licensed for commercial services.
Second, the bill would change the treatment of loans made by
the Telecommunications Development Fund. The cost of these
changes is described below.
Federal relocation costs
CBO estimates that implementing H.R. 1320 would increase
net direct spending by $2.5 billion over the next 10 years
because it would allow agencies to spend some of the proceeds
from spectrum auctions without further appropriation. Spending
for agencies' spectrum relocation expenses is subject to
appropriation under current law. By providing this direct
spending authority, the bill could lead to lower discretionary
spending in the future if the funds appropriated are reduced by
corresponding amounts.
Relocation Costs Under Current Law. Some of the
electromagnetic spectrum now used by federal agencies is being
reallocated from government to commercial use. Relocating
agency operations to new frequencies or services typically
involves buying new equipment and facilities. Under current
law, those costs will be paid by the companies that win the
commercial licenses at auctions held by the Federal
Communications Commission (FCC). Agencies will notify bidders
of estimated relocation costs before the auction begins, but
final payment will be negotiated and made after the winning
bidder has obtained--and paid for--the license. Funds paid by
the commercial licensees for relocation costs will be deposited
in the Treasury as miscellaneous receipts, but agencies cannot
spend the proceeds until they are appropriated. How well the
current relocation process would work is unknown because no
auctions of such frequencies have occurred since the
requirements were enacted in 1998.
Proposed Changes. H.R. 1320 would make two key changes in
the agency relocation process. First, costs for relocation
would be paid from the total auction proceeds, rather than by
individual licensees. The bill would direct the FCC to set a
minimum bid for an auction equal to 110 percent of the
estimated relocation costs. If auction proceeds exceed that
minimum bid, then all of the proceeds from the auction of the
federal frequencies would be deposited in a Spectrum Relocation
Fund. Auctions that failed to at least match the minimum bid
would be cancelled. Under the bill, all auction proceeds in the
fund could be spent by agencies without further appropriation
on eligible relocation costs. Agency expenditures and
relocation progress would be subject to review by the Office of
Management and Budget (OMB), the National Telecommunications
and Information Administration (NTIA), various Congressional
committees, and the General Accounting Office (GAO). Unspent
auction proceeds would remain in the Treasury.
The bill also would require the FCC to notify NTIA of an
upcoming auction of least 18 months in advance, giving agencies
a year to prepare estimates of relocation costs that must be
given to the FCC at least six months prior to the start of the
auction.
Bugetary Effects Related to Auctioning the 1710-1755
Megahertz Band. The relocation procedures, both in current law
and under H.R. 1320, apply only to certain frequencies.Among
the bands eligible for reimbursement are the 1710-1755 megahertz band,
three small bands covered by existing law, and any frequencies
reallocated from government to commercial use after January 1, 2003.
Most of the estimated cost of this bill would result from
applying the new process to the 1710-1755 megahertz band, which
is scheduled to be paired with 45 megahertz of commercial
spectrum and auctioned for use by advanced, third-generation
wireless services in the next few years. Under current law, CBO
anticipates that licenses for this 90 megahertz will be
auctioned near the beginning of fiscal year 2005 and that
proceeds totaling about $1.5 billion would be collected over
the 2005-2006 period. This estimate reflects our expectation
that companies will discount their bids by about $2 billion to
$3 billion because of the uncertainty associated with the time
and cost of relocating federal and commercial users.
CBO estimates that implementing the new relocation
procedures would affect the budget in three ways:
Requiring the FCC to give NTIA at least 18-months
notice would delay the start of the auction relative to CBO's
baseline assumption, thereby shifting about $7.5 billion in
offsetting receipts from 2005 and 2006. CBO assumes that the
18-month period would not begin until the NTIA and FCC identify
alternative frequencies for federal operations, which will be a
key determinant of relocation costs.
Agencies would spend about $2.5 billion, without
further appropriation, to relocate federal systems that now use
this band. This estimate reflects the preliminary estimate
prepared by NTIA in 2001 on the cost of moving all federal
systems out of this band. Most of this expense will be incurred
by the Department of Defense (DoD).
The estimated increase in direct spending could be
larely offset by a reduction in discretionary spending if the
amounts appropriated in future years are reduced
correspondingly. However, CBO anticipates that total spending
probably would be higher under H.R. 1320 than under current law
because agencies' relocation plans would not be subject to
negotiations with winning bidders or the appropriation process.
It is possible that the net effect of the bill on direct
spending could be higher or lower than estimated by CBO. On the
one hand, agency spending could exceed $2.5 billion because the
NTIA study was based on preliminary data and did not include
all systems or all allowable expenditures. Recent statements by
DoD have suggested that its costs alone could exceed $4
billion.
On the other hand, simplifying the reimbursement process
could reduce some of the uncertainty for bidders, which could
result in higher auction proceeds. Under current law, companies
may underbid or overbid for spectrum licenses depending on how
the amount they ultimately pay agencies for relocation expenses
compares to the amount assumed in their bidding strategy.
Likewise, under the bill, agencies might have access to funds
more quickly than under the current process, but CBO has no
basis for determining whether this would have a material effect
on when the spectrum would be available for commercial service.
On balance, CBO expects that simplifying the process for
bidders might lead to higher proceeds, but we estimate that the
magnitude of any change would be small relative to other
factors that will affect the market value of these frequencies.
Budgetary Effects Related to Other Bands. Based on
information from NTIA and other agencies, CBO expects that
implementing this bill would have no significant effect on the
net proceeds from other auctions likely to be held before the
FCC's auction authority expires in 2007.
Telecommunications Development Fund
The TDF was established by law in 1996 to spend the
interest earned on certain proceeds collected by the FCC as
part of the spectrum auction process. These interest earnings
are used as venture capital for small businesses and spent on
other activities related to telecommunications services. The
fund is administered by a seven-member board appointed by the
FCC and is governed by certain statutory criteria. H.R. 1320
would remove one of those requirements, namely that loans made
by the TDF are subject to the Federal Credit Reform Act.
Since its creation, CBO has suggested that the TDF be
included in the budget as a federal activity because its
leadership, purpose, and funding are controlled by the
government. OMB, however, treats the TDF as a nonfederal
entity. Because the TDF currently is treated as a nonfederal
entity, CBO estimates that enacting this provision would have
no budgetary impact.
Intergovernmental and Private-Sector Impact: H.R. 1320
contains no intergovernmental or private-sector mandates as
defined in the UMRA and would impose no costs on state, local,
or tribal governments.
Comparison With Other Estimates: In February 2003, the
Administration recommended enacting legislation similar to H.R.
1320. The Office of Management and Budget estimated that
enacting its proposed legislation also would increase direct
spending by $2.5 billion over the 2005-2013 period.
Estimate Prepared by: Federal Costs: Kathleen Gramp, Impact
on State, Local, and Tribal Governments: Victoria Heid Hall,
and Impact on the Private Sector: Paige Piper/Bach.
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
``Commercial Spectrum Enhancement Act of 2002.''
Section 2. Relocation of Eligible Federal Entities for the Reallocation
of Spectrum for Commercial Purposes
Section 2 of the bill amends section 113(g) of the National
Telecommunications and Information Administration Organization
Act (47 U.S.C. 923(g)) by striking the existing provisions
governing the compensation of federal entities for relocation
costs incurred as the result of the reallocation of frequencies
from government to non-government use and by replacing those
provisions with the following:
Section 113(g)(1) provides that any federal entity that has
spectrum operations and that incurs relocation costs because of
the reallocation of eligible frequencies from government to
non-government use shall receive compensation for relocation
expenses from the SRF. Section 113(g)(1) also permits Federal
Power Agencies (FPAs) that voluntarily relocate from spectrum
bands reallocated from government to non-government use to
receive compensation for relocation costs from the SRF.
Section 113(g)(2) establishes the frequency bands from
which a federal entity's relocation costs would be compensated
from the SRF. The bands include the 216-220 megahertz band, the
1432-1435 megahertz band, the 1710-1755 megahertz band, and the
2385-2390 megahertz band. Also included as an eligible band is
any other band of frequencies reallocated from federal to non-
federal use after January 1, 2003 that the Commission assigns
by auction, except for the 1390-1400 megahertz band, the 1427-
1432 megahertz band, the 1670-1675 megahertz band, the 2300-
2305 megahertz band, the 2305-2310 megahertz band, the 2390-
2450 megahertz band, the 3650-3700 megahertz band, and the
4940-4990 megahertz band.
Section 113(g)(3) defines relocation costs for which
reimbursement from the SRF may be received by federal entities
for achieving comparable capability of systems by relocating
spectrum operations to a different frequency band or by
utilizing an alternative technology. The Committee recognizes
the unique situation of the Federal Power Agencies with respect
to their funding derived from ratepayers. The Committee does
not expect the requirement for the agencies to develop a pre-
auction estimate of relocation expenses to result in out-of-
pocket costs for the FPAs. To the extent necessary, the
Committee expects NTIA and the Department of Energy will assist
the FPAs in developing this estimate.
New section 113(g)(4) requires the Commission to notify
NTIA at least 18 months prior to the commencement of any
auction of reallocated eligible frequencies. At least six
months prior to such an auction, NTIA, on behalf of a federal
entity that will be relocating spectrum operations from a
reallocated band, must notify the Commission of the estimated
relocation costs and timelines for such relocation. OMB is
required to review the estimated costs and timelines before
NTIA makes its submission to the Commission. New section
113(g)(4) also requires the NTIA to provide federal entities,
upon a timely request, with information regarding alternative
frequency assignments for the purpose of calculating estimated
relocation costs and timelines. NTIA must provide the
information to the Commission and to requesting federal
entities by the geographic location of the federal entities'
facilities or systems or the frequency bands used by such
facilities or systems. However, new section 113(g)(4) only
requires NTIA to provide such information to the extent that it
is consistent with national security and if it is practicable
to do so.
New section 113(g)(5) requires NTIA to provide a copy of
any cost and timeline estimate submitted to the Commission to
the Committees on Appropriations and Energy and Commerce of the
House of Representatives, the Committees on Appropriations and
Commerce, Science, and Transportation of the Senate, and the
Comptroller General.
New section 113(g)(6) requires NTIA to take any actions
necessary to ensure the timely relocation of federal entities'
spectrum operations from eligible frequencies to frequencies or
facilities of comparable capability. Once NTIA has determined
that a federal entity has achieved comparable capability of
systems, new section 113(g)(6) requires NTIA to terminate the
entity's authorization to operate on the reallocated frequency
band, and to notify the Commission that the entity's
relocationis complete. New section 113(g)(6) also requires NTIA to
terminate a federal entity's authorization if the NTIA determines that
the entity has unreasonably failed to comply with the timeline for
relocation submitted by OMB to Congress after the completion of the
auction.
Section 3. Minimum Auction Receipts and Disposition of Proceeds
Section 3(a) amends section 309(j)(3) of the Communications
Act of 1934 (47 U.S.C. 309(j)(3)) by requiring an auction of
eligible frequencies described in section 113(g)(2) to yield at
least 110 percent of the estimated relocation costs as provided
to the Commission under new section 113(g)(4).
Section 3(b) further amends section 309(j) of the
Communications Act by requiring the Commission to revise its
regulations to ensure that the total cash proceeds from any
auction of eligible frequencies equals at least 110 percent of
the estimated relocation costs provided to the Commission.
Section 3(b) amends section 309(j) of the Communications Act to
prohibit the Commission from concluding any auction of eligible
frequencies if the total cash proceeds are less than 110
percent of the total estimated relocation costs. If the
Commission cannot conclude an auction, the Commission is
required to cancel the auction, return any deposits to
participating bidders within 45 days, and absolve such bidders
from any obligation to the United States to bid in any
subsequent reauction of the spectrum.
For auctions of eligible frequencies, Section 3(b) permits
the Commission to grant a license for commercial use prior to
the termination of a federal entity's authorization. However,
the Commission is required to prevent the licensee from causing
harmful interference to a federal entity until the entity's
authorization has been terminated. The Commission should
authorize the commercial use of government frequencies prior to
termination of the federal entity's authorization, to the
extent such use would not cause harmful interference to the
federal entity. However, the Committee expects the Commission
to consider any such commercial use to be in addition to the
term of a commercial entity's license that commences upon the
termination of the federal entity's authorization by NTIA in
accordance with H.R. 1320.
Section 3(c) amends section 309(j) of the Communications
Act by requiring that proceeds from an auction of eligible
frequencies must be deposited in the SRF.
Section 4. Establishment of Fund and Procedures
Section 4 creates a new section 118 of the National
Telecommunications and Information Organization Act. New
section 118(a) establishes a separate fund (the SRF) on the
books of the Treasury. New section 118(a) provides that OMB
shall administer the SRF in consultation with NTIA.
New section 118(b) provides that the SRF shall be credited
with the proceeds from auctions of eligible frequencies.
New section 118(c) provides that the amounts in the SRF
shall be used to pay the relocation costs of federal entities
that relocate their spectrum operations from eligible
frequencies. The amounts in the SRF are not available for any
other purpose.
New section 118(d) appropriates from the SRF such sums as
required to pay the relocation costs of eligible federal
entities. The Committee recognizes that this provision deviates
from the traditional Congressional process for appropriating
money for federal agencies. However, new section 118(d) is one
of the most important provisions in H.R. 1320. Without the
absolute certainty that money will be available to pay
relocation costs, federal agencies would be extremely
reluctant, if not outright opposed, to relocating their
spectrum operations. This certainty can only be provided
through a deviation from the annual appropriations process, and
through guaranteeing that all proceeds from an auction of
eligible frequencies will go directly into the SRF, be used
exclusively for relocation expenses, and be available from the
outset, not subject to annual appropriations.
New section 118(d) also provides that monies from the SRF
cannot be transferred to a federal entity unless OMB, in
consultation with NTIA, has determined the appropriateness of
the relocation costs and the timeline for relocation. The
Committee expects agencies, in consultation with OMB and NTIA,
to reevaluate cost estimates after an auction has been
completed. The Committee does not expect the cost estimate
required by new section 113(g)(4) to be the only cost estimate
performed to determine actual relocation costs.
New section 118(d) further provides that monies from the
SRF cannot be transferred to a federal entity until 30 days
after OMB submits a detailed plan describing how the funds will
be spent for relocation and the timeline for relocation to the
Committees on Appropriations and Energy and Commerce of the
House of Representatives, the Committees on Appropriations and
Commerce, Science, and Transportation of the Senate, and the
Comptroller General.
New section 118(d) provides that any auction proceeds
remaining in the SRF after the payment of relocation costs
shall revert to and be deposited in the Treasury no later than
8 years after such proceeds are initially deposited in the SRF.
Proceeds from subsequent auctions conducted in accordance with
H.R. 1320 would not revert to the Treasury eight years after
the initial deposit of proceeds from the first auction
conducted in accordance with H.R. 1320. Excess proceeds from
each auction remain in the fund for no more than eight years
after their initial deposit following that particular auction.
New section 118(e) provides that monies appropriated from
the SRF are transferred to eligible federal entities in
accordance with new section 118(d). New section 118(e) permits
more than one transfer to be made to an eligible federal
entity. However, if a subsequent transfer (or transfers)
exceeds 10 percent of the first transfer to an entity, such
subsequent transfer cannot be made without the prior approval
of OMB, in consultation with NTIA, and until 45 days after OMB
notifies the Committees on Appropriations and Energy and
Commerce of the House of Representatives, the Committees on
Appropriations and Commerce, Science, and Transportation of the
Senate, and the Comptroller General. The notice of the
subsequent transfer must include a detailed plan describing how
the funds will be spent for relocation and the timeline
forrelocation, as well as an explanation of the need for the subsequent
transfer. In addition, within 30 days after receiving the plan, the
Comptroller General is required to review the plan and submit to the
relevant committees an assessment of the explanation for the subsequent
transfer.
New section 118(e) also provides that amounts transferred
to an eligible federal entity shall be credited to the entity's
appropriations account. The amounts shall remain available
until expended, although any funds in excess of actual
relocation costs shall be transferred back to the SRF
immediately after NTIA has notified the Commission that an
entity's relocation is complete or has determined that such
entity has unreasonably failed to complete the relocation in
accordance with the timeline submitted to Congress by OMB under
new section 118(d). Eligible federal entities that receive
amounts from the SRF are required to report their expenditures
to OMB.
Section 5. Telecommunications Development Fund
Section 5 clarifies that the Telecommunications Development
Fund is not subject to the requirements of the Federal Credit
Reform Act of 1990 or any other applicable law. Loans made with
monies derived from the Telecommunications Development Fund are
not backed by the full faith and credit of the United States.
Therefore, subjecting such loans to the Federal Credit Reform
Act and other similar laws is not necessary.
Section 6. Construction
Section 6 provides that H.R. 1320 does not modify section
1062(b) of the National Defense Authorization Act for Fiscal
Year 2000 (Public Law 106-65), which prohibits, with certain
exceptions, the surrender of spectrum by the Department of
Defense unless comparable spectrum is made available, in
advance, for the relevant operations. The Secretary of
Commerce, Secretary of Defense, and the Chairman of the Joint
Chiefs of Staff must jointly certify that the alternative band
or bands provides comparable capability.
Section 7. Section Annual Report
Section 7 requires NTIA to submit an annual report to
Committees on Appropriations and Energy and Commerce of the
House of Representatives, the Committees on Appropriations and
Commerce, Science, and Transportation of the Senate, and the
Comptroller General regarding (1) the progress made in adhering
to the timelines presented by OMB to Congress under new section
118(d), and (2) the estimated relocation costs, the actual
costs incurred, and the amount of such costs paid from the SRF.
This information must be provided on a communication-system-by-
system and an auction-by-auction basis.
Section 8. Preservation of Authority; NTIA Report Required
Section 8 clarifies that, with the exception of the 216-220
megahertz band, the 1432-1435 megahertz band, the 1710-1755
megahertz band, and the 2385-2390 megahertz band, nothing in
H.R. 1320 is intended to limit the Commission's authority to
allocate spectrum reallocated from government to non-government
use for unlicensed, public safety, shared, or non-commercial
purposes.
Section 8 also requires NTIA to submit a report to the
Committee on Energy and Commerce of the House of
Representatives and the Committee on Commerce, Science, and
Transportation of the Senate within one year after enactment of
H.R. 1320 regarding policy options to compensate federal
entities for relocation costs when such entities' spectrum
bands are reallocated from government to non-government use and
the Commission allocates the spectrum for unlicensed, public
safety, shared, or non-commercial purposes. The Committee
expects NTIA to make policy recommendations appropriate to and
consistent with its statutory authority.
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):
NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION ORGANIZATION
ACT
* * * * * * *
TITLE I--NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION
* * * * * * *
PART B--TRANSFER OF AUCTIONABLE FREQUENCIES
* * * * * * *
SEC. 113. IDENTIFICATION OF REALLOCABLE FREQUENCIES.
(a) * * *
* * * * * * *
(g) Relocation of Federal Government Stations.--
[(1) In general.--
[(A) Authority of federal entities to accept
compensation.--In order to expedite the
commercial use of the electromagnetic spectrum
and notwithstanding section 3302(b) of title
31, United States Code, any Federal entity
which operates a Federal Government station may
accept from any person payment of the expenses
of relocating the Federal entity's operations
from one or more frequencies to another
frequency or frequencies, including the costs
of any modification, replacement, or reissuance
of equipment, facilities, operating manuals, or
regulations incurred by that entity. Any such
Federal entity which proposes to so relocate
shall notify the NTIA, which in turn shall
notify the Commission, before the auction
concerned of the marginal costs anticipated to
be associated with such relocation or with
modifications necessary to accommodate
prospective licensees. The Commission in turn
shall notify potential bidders of the estimated
relocation or modification costs based on the
geographic area covered by the proposed
licenses before the auction.
[(B) Requirement to compensate federal
entities.--Any person on whose behalf a Federal
entity incurs costs under subparagraph (A)
shall compensate the Federal entity in advance
for such costs. Such compensation may take the
form of a cash payment or in-kind compensation.
[(C) Disposition of payments.--
[(i) Payment by electronic funds
transfer.--A person making a cash
payment under this paragraph shall make
the cash payment by depositing the
amount of the payment by electronic
funds transfer in the account of the
Federal entity concerned in the
Treasury of the United States or in
another account as authorized by law.
[(ii) Availability.--Subject to the
provisions of authorization Acts and
appropriations Acts, amounts deposited
under this subparagraph shall be
available to the Federal entity
concerned to pay directly the costs of
relocation under this paragraph, to
repay or make advances to
appropriations or funds which do or
will initially bear all or part of such
costs, or to refund excess sums when
necessary.
[(D) Application to certain other
relocations.--The provisions of this paragraph
also apply to any Federal entity that operates
a Federal Government station assigned to used
electromagnetic spectrum identified for
reallocation under subsection (a) if before
August 5, 1997, the Commission has not
identified that spectrum for service or
assigned licenses or otherwise authorized
service for that spectrum.
[(E) Implementation procedures.--The NTIA and
the Commission shall develop procedures for the
implementation of this paragraph, which
procedures shall include a process for
resolving any differences that arise between
the Federal Government and commercial licensees
regarding estimates of relocation or
modification costs under this paragraph.
[(F) Inapplicability to certain
relocations.--With the exception of the band of
frequencies located at 1710-1755 megahertz, the
provisions of this paragraph shall not apply to
Federal spectrum identified for reallocation in
the first reallocation report submitted to the
President and Congress under subsection (a).
[(2) Process for relocation.--Any person seeking to
relocate a Federal Government station that has been
assigned a frequency within a band that has been
allocated for mixed Federal and non-Federal use, or
that has been scheduled for reallocation to non-Federal
use, may submit a petition for such relocation to NTIA.
The NTIA shall limit or terminate the Federal
Government station's operating license within 6 months
after receiving the petition if the following
requirements are met:
[(A) the person seeking relocation of the
Federal Government station has guaranteed to
pay all relocation costs incurred by the
Federal entity, including all
engineering,equipment, site acquisition and construction, and
regulatory fee costs;
[(B) all activities necessary for
implementing the relocation have been
completed, including construction of
replacement facilities (if necessary and
appropriate) and identifying and obtaining new
frequencies for use by the relocated Federal
Government station (where such station is not
relocating to spectrum reserved exclusively for
Federal use);
[(C) any necessary replacement facilities,
equipment modifications, or other changes have
been implemented and tested to ensure that the
Federal Government station is able to
successfully accomplish its purposes; and
[(D) NTIA has determined that the proposed
use of the spectrum frequency band to which the
Federal entity will relocate its operations
is--
[(i) consistent with obligations
undertaken by the United States in
international agreements and with
United States national security and
public safety interests; and
[(ii) suitable for the technical
characteristics of the band and
consistent with other uses of the band.
In exercising its authority under clause (i) of
this subparagraph, NTIA shall consult with the
Secretary of Defense, the Secretary of State,
or other appropriate officers of the Federal
Government.
[(3) Right to reclaim.--If within one year after the
relocation the Federal entity demonstrates to the
Commission that the new facilities or spectrum are not
comparable to the facilities or spectrum from which the
Federal Government station was relocated, the person
who filed the petition under paragraph (2) for such
relocation shall take reasonable steps to remedy any
defects or pay the Federal entity for the expenses
incurred in returning the Federal Government station to
the spectrum from which such station was relocated.]
(1) Eligible federal entities.--Any Federal entity
that operates a Federal Government station assigned to
a band of frequencies specified in paragraph (2) and
that incurs relocation costs because of the
reallocation of frequencies from Federal use to non-
Federal use shall receive payment for such costs from
the Spectrum Relocation Fund, in accordance with
section 118 of this Act. For purposes of this
paragraph, Federal power agencies exempted under
subsection (c)(4) that choose to relocate from the
frequencies identified for reallocation pursuant to
subsection (a), are eligible to receive payment under
this paragraph.
(2) Eligible frequencies.--The bands of eligible
frequencies for purposes of this section are as
follows:
(A) the 216-220 megahertz band, the 1432-1435
megahertz band, the 1710-1755 megahertz band,
and the 2385-2390 megahertz band of
frequencies; and
(B) any other band of frequencies reallocated
from Federal use to non-Federal use after
January 1, 2003, that is assigned by
competitive bidding pursuant to section 309(j)
of the Communications Act of 1934 (47 U.S.C.
309(j)), except for bands of frequencies
previously identified by the National
Telecommunications and Information
Administration in the Spectrum Reallocation
Final Report, NTIA Special Publication 95-32
(1995).
(3) Definition of relocation costs.--For purposes of
this subsection, the term ``relocation costs'' means
the costs incurred by a Federal entity to achieve
comparable capability of systems, regardless of whether
that capability is achieved by relocating to a new
frequency assignment or by utilizing an alternative
technology. Such costs include--
(A) the costs of any modification or
replacement of equipment, software, facilities,
operating manuals, training costs, or
regulations that are attributable to
relocation;
(B) the costs of all engineering, equipment,
software, site acquisition and construction
costs, as well as any legitimate and prudent
transaction expense, including outside
consultants, and reasonable additional costs
incurred by the Federal entity that are
attributable to relocation, including increased
recurring costs associated with the replacement
facilities;
(C) the costs of engineering studies,
economic analyses, or other expenses reasonably
incurred in calculating the estimated
relocation costs that are provided to the
Commission pursuant to paragraph (4) of this
subsection;
(D) the one-time costs of any modification of
equipment reasonably necessary to accommodate
commercial use of such frequencies prior to the
termination of the Federal entity's primary
allocation or protected status, when the
eligible frequencies as defined in paragraph
(2) of this subsection are made available for
private sector uses by competitive bidding and
a Federal entity retains primary allocation or
protected status in those frequencies for a
period of time after the completion of the
competitive bidding process; and
(E) the costs associated with the accelerated
replacement of systems and equipment if such
acceleration is necessary to ensure the timely
relocation of systems to a new frequency
assignment.
(4) Notice to commission of estimated relocation
costs.--
(A) The Commission shall notify the NTIA at
least 18 months prior to the commencement of
any auction of eligible frequencies defined in
paragraph (2). At least 6 months prior to the
commencement of any such auction, the NTIA, on
behalf of the Federal entities and after review
by the Office of Management and Budget, shall
notify the Commission of estimated relocation
costs and timelines for such relocation.
(B) Upon timely request of a Federal entity,
the NTIA shall provide such entity with
information regarding an alternative frequency
assignment or assignments to which their
radiocommunications operations could be
relocated for purposes of calculating the
estimated relocation costsand timelines to be
submitted to the Commission pursuant to subparagraph (A).
(C) To the extent practicable and consistent
with national security considerations, the NTIA
shall provide the information required by
subparagraphs (A) and (B) by the geographic
location of the Federal entities' facilities or
systems and the frequency bands used by such
facilities or systems.
(5) Notice to congressional committees and gao.--The
NTIA shall, at the time of providing an initial
estimate of relocation costs to the Commission under
paragraph (4)(A), submit to the Committees on
Appropriations and Energy and Commerce of the House of
Representatives, the Committees on Appropriations and
Commerce, Science, and Transportation of the Senate,
and the Comptroller General a copy of such estimate and
the timelines for relocation.
(6) Implementation of procedures.--The NTIA shall
take such actions as necessary to ensure the timely
relocation of Federal entities' spectrum-related
operations from frequencies defined in paragraph (2) to
frequencies or facilities of comparable capability.
Upon a finding by the NTIA that a Federal entity has
achieved comparable capability of systems by relocating
to a new frequency assignment or by utilizing an
alternative technology, the NTIA shall terminate the
entity's authorization and notify the Commission that
the entity's relocation has been completed. The NTIA
shall also terminate such entity's authorization if the
NTIA determines that the entity has unreasonably failed
to comply with the timeline for relocation submitted by
the Director of the Office of Management and Budget
under section 118(d)(2)(B).
* * * * * * *
SEC. 118. SPECTRUM RELOCATION FUND.
(a) Establishment of Spectrum Relocation Fund.--There is
established on the books of the Treasury a separate fund to be
known as the ``Spectrum Relocation Fund'' (in this section
referred to as the ``Fund''), which shall be administered by
the Office of Management and Budget (in this section referred
to as ``OMB''), in consultation with the NTIA.
(b) Crediting of Receipts.--The Fund shall be credited with
the amounts specified in section 309(j)(8)(D) of the
Communications Act of 1934 (47 U.S.C. 309(j)(8)(D)).
(c) Used To Pay Relocation Costs.--The amounts in the Fund
from auctions of eligible frequencies are authorized to be used
to pay relocation costs, as defined in section 113(g)(3) of
this Act, of an eligible Federal entity incurring such costs
with respect to relocation from those frequencies.
(d) Fund Availability.--
(1) Appropriation.--There are hereby appropriated
from the Fund such sums as are required to pay the
relocation costs specified in subsection (c).
(2) Transfer conditions.--None of the funds provided
under this subsection may be transferred to any
eligible Federal entity--
(A) unless the Director of OMB has
determined, in consultation with the NTIA, the
appropriateness of such costs and the timeline
for relocation; and
(B) until 30 days after the Director of the
OMB has submitted to the Committees on
Appropriations and Energy and Commerce of the
House of Representatives, the Committees on
Appropriations and Commerce, Science, and
Transportation of the Senate, and the
Comptroller General a detailed plan describing
how the sums transferred from the Fund will be
used to pay relocation costs in accordance with
such subsection and the timeline for such
relocation.
(3) Reversion of unused funds.--Any auction proceeds
in the Fund that are remaining after the payment of the
relocation costs that are payable from the Fund shall
revert to and be deposited in the general fund of the
Treasury not later than 8 years after the date of the
deposit of such proceeds to the Fund.
(e) Transfer to Eligible Federal Entities.--
(1) Transfer.--
(A) Amounts made available pursuant to
subsection (d) shall be transferred to eligible
Federal entities, as defined in section
113(g)(1) of this Act.
(B) An eligible Federal entity may receive
more than one such transfer, but if the sum of
the subsequent transfer or transfers exceeds 10
percent of the original transfer--
(i) such subsequent transfers are
subject to prior approval by the
Director of OMB as required by
subsection (d)(2)(A);
(ii) the notice to the committees
containing the plan required by
subsection (d)(2)(B) shall be not less
than 45 days prior to the date of the
transfer that causes such excess above
10 percent;
(iii) such notice shall include, in
addition to such plan, a explanation of
need for such subsequent transfer or
transfers; and
(iv) the Comptroller General shall,
within 30 days after receiving such
plan, review such plan and submit to
such committees an assessment of the
explanation for the subsequent transfer
or transfers.
(C) Such transferred amounts shall be
credited to the appropriations account of the
eligible Federal entity which has incurred, or
will incur, such costs, and shall, subject to
paragraph (2), remain available until expended.
(2) Retransfer to fund.--An eligible Federal entity
that has received such amounts shall report its
expenditures to OMB and shall transfer any amounts in
excess of actual relocation costs back to the Fund
immediately after the NTIA has notified the Commission
that the entity's relocation is complete, or has
determined that such entity has unreasonably failed to
complete such relocation in accordance with the
timeline required by subsection (d)(2)(A).
* * * * * * *
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COMMUNICATIONS ACT OF 1934
* * * * * * *
TITLE III--PROVISIONS RELATING TO RADIO
PART I--GENERAL PROVISIONS
* * * * * * *
SEC. 309. ACTION UPON APPLICATIONS; FORM OF AND CONDITIONS ATTACHED TO
LICENSES.
(a) * * *
* * * * * * *
(j) Use of Competitive Bidding.--
(1) * * *
* * * * * * *
(3) Design of systems of competitive bidding.--For
each class of licenses or permits that the Commission
grants through the use of a competitive bidding system,
the Commission shall, by regulation, establish a
competitive bidding methodology. The Commission shall
seek to design and test multiple alternative
methodologies under appropriate circumstances. The
Commission shall, directly or by contract, provide for
the design and conduct (for purposes of testing) of
competitive bidding using a contingent combinatorial
bidding system that permits prospective bidders to bid
on combinations or groups of licenses in a single bid
and to enter multiple alternative bids within a single
bidding round. In identifying classes of licenses and
permits to be issued by competitive bidding, in
specifying eligibility and other characteristics of
such licenses and permits, and in designing the
methodologies for use under this subsection, the
Commission shall include safeguards to protect the
public interest in the use of the spectrum and shall
seek to promote the purposes specified in section 1 of
this Act and the following objectives:
(A) * * *
* * * * * * *
(D) efficient and intensive use of the
electromagnetic spectrum; [and]
(E) ensure that, in the scheduling of any
competitive bidding under this subsection, an
adequate period is allowed--
(i) * * *
(ii) after issuance of bidding rules,
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[.]; and
(F) for any auction of eligible frequencies
described in section 113(g)(2) of the National
Telecommunications and Information
Administration Organization Act (47 U.S.C.
923(g)(2)), the recovery of 110 percent of
estimated relocation costs as provided to the
Commission pursuant to section 113(g)(4) of
such Act.
* * * * * * *
(8) Treatment of revenues.--
(A) General rule.--Except as provided in
subparagraph (B) or subparagraph (D), all
proceeds from the use of a competitive bidding
system under this subsection shall be deposited
in the Treasury in accordance with chapter 33
of title 31, United States Code.
* * * * * * *
(D) Disposition of cash proceeds.--Cash
proceeds attributable to the auction of any
eligible frequencies described in section
113(g)(2) of the National Telecommunications
and Information Administration Organization Act
(47 U.S.C. 923(g)(2)) shall be deposited in the
Spectrum Relocation Fund established under
section 118 of such Act, and shall be available
in accordance with that section.
* * * * * * *
(15) Special auction provisions for eligible
frequencies.--
(A) Special regulations.--The Commission
shall revise the regulations prescribed under
paragraph (4)(F) of this subsection to
prescribe methods by which the total cash
proceeds from any auction of eligible
frequencies described in section 113(g)(2) of
the National Telecommunications and Information
Administration Organization Act (47 U.S.C.
923(g)(2)) shall at least equal 110 percent of
the total estimated relocation costs provided
to the Commission pursuant to section 113(g)(4)
of such Act.
(B) Conclusion of auctions contingent on
minimum proceeds.--The Commission shall not
conclude any auction of eligible frequencies
described in section 113(g)(2) of such Act if
the total cash proceeds attributable to such
spectrum are less than 110 percent of the total
estimated relocation costs provided to the
Commission pursuant to section 113(g)(4) of
such Act. If the Commission is unable to
conclude an auction for the foregoing reason,
the Commission shall cancel the auction, return
within 45 days after the auction cancellation
date any deposits from participating bidders
held in escrow, and absolve such bidders from
any obligation to the United States to bid in
any subsequent reauction of such spectrum.
(C) Authority to issue prior to
deauthorization.--In any auction conducted
under the regulations required by subparagraph
(A), the Commission may grant a license
assigned for the use of eligible frequencies
prior to the termination of an eligible Federal
entity's authorization. However, the Commission
shall condition such license by requiring that
the licensee cannot cause harmful interference
to such Federal entity until such entity's
authorization has been terminated by the
National Telecommunications and Information
Administration.
* * * * * * *
TITLE VII--MISCELLANEOUS PROVISIONS
* * * * * * *
SEC. 714. TELECOMMUNICATIONS DEVELOPMENT FUND.
(a) * * *
* * * * * * *
[(f) Lending and Credit Operations.--Loans or other
extensions of credit from the Fund shall be made available in
accordance with the requirements of the Federal Credit Reform
Act of 1990 (2 U.S.C. 661 et seq.) and any other applicable law
to an eligible small business on the basis of--
[(1) the analysis of the business plan of the
eligible small business;
[(2) the reasonable availability of collateral to
secure the loan or credit extension;
[(3) the extent to which the loan or credit extension
promotes the purposes of this section; and
[(4) other lending policies as defined by the Board.]
(f) Lending and Credit Operations.--Loans or other extensions
of credit from the Fund shall be made available to an eligible
small business on the basis of--
(1) the analysis of the business plan of the eligible
small business;
(2) the reasonable availability of collateral to
secure the loan or credit extension;
(3) the extent to which the loan or credit extension
promotes the purposes of this section; and
(4) other lending policies as defined by the Board.
* * * * * * *