[House Hearing, 113 Congress] [From the U.S. Government Publishing Office] OVERSIGHT OF INCENTIVE AUCTION IMPLEMENTATION ======================================================================= HEARING BEFORE THE SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY OF THE COMMITTEE ON ENERGY AND COMMERCE HOUSE OF REPRESENTATIVES ONE HUNDRED THIRTEENTH CONGRESS FIRST SESSION __________ JULY 23, 2013 __________ Serial No. 113-74 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Printed for the use of the Committee on Energy and Commerce energycommerce.house.gov _______ U.S. GOVERNMENT PRINTING OFFICE 86-398 PDF WASHINGTON : 2014 ----------------------------------------------------------------------- For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800 DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC 20402-0001 COMMITTEE ON ENERGY AND COMMERCE FRED UPTON, Michigan Chairman RALPH M. HALL, Texas HENRY A. WAXMAN, California JOE BARTON, Texas Ranking Member Chairman Emeritus JOHN D. DINGELL, Michigan ED WHITFIELD, Kentucky Chairman Emeritus JOHN SHIMKUS, Illinois FRANK PALLONE, Jr., New Jersey JOSEPH R. PITTS, Pennsylvania BOBBY L. RUSH, Illinois GREG WALDEN, Oregon ANNA G. ESHOO, California LEE TERRY, Nebraska ELIOT L. ENGEL, New York MIKE ROGERS, Michigan GENE GREEN, Texas TIM MURPHY, Pennsylvania DIANA DeGETTE, Colorado MICHAEL C. BURGESS, Texas LOIS CAPPS, California MARSHA BLACKBURN, Tennessee MICHAEL F. DOYLE, Pennsylvania Vice Chairman JANICE D. SCHAKOWSKY, Illinois PHIL GINGREY, Georgia JIM MATHESON, Utah STEVE SCALISE, Louisiana G.K. BUTTERFIELD, North Carolina ROBERT E. LATTA, Ohio JOHN BARROW, Georgia CATHY McMORRIS RODGERS, Washington DORIS O. MATSUI, California GREGG HARPER, Mississippi DONNA M. CHRISTENSEN, Virgin LEONARD LANCE, New Jersey Islands BILL CASSIDY, Louisiana KATHY CASTOR, Florida BRETT GUTHRIE, Kentucky JOHN P. SARBANES, Maryland PETE OLSON, Texas JERRY McNERNEY, California DAVID B. McKINLEY, West Virginia BRUCE L. BRALEY, Iowa CORY GARDNER, Colorado PETER WELCH, Vermont MIKE POMPEO, Kansas BEN RAY LUJAN, New Mexico ADAM KINZINGER, Illinois PAUL TONKO, New York H. MORGAN GRIFFITH, Virginia GUS M. BILIRAKIS, Florida BILL JOHNSON, Missouri BILLY LONG, Missouri RENEE L. ELLMERS, North Carolina Subcommittee on Communications and Technology GREG WALDEN, Oregon Chairman ROBERT E. LATTA, Ohio ANNA G. ESHOO, California Vice Chairman Ranking Member JOHN SHIMKUS, Illinois MICHAEL F. DOYLE, Pennsylvania LEE TERRY, Nebraska DORIS O. MATSUI, California MIKE ROGERS, Michigan BRUCE L. BRALEY, Iowa MARSHA BLACKBURN, Tennessee PETER WELCH, Vermont STEVE SCALISE, Louisiana BEN RAY LUJAN, New Mexico LEONARD LANCE, New Jersey JOHN D. DINGELL, Michigan BRETT GUTHRIE, Kentucky FRANK PALLONE, Jr., New Jersey CORY GARDNER, Colorado BOBBY L. RUSH, Illinois MIKE POMPEO, Kansas DIANA DeGETTE, Colorado ADAM KINZINGER, Illinois JIM MATHESON, Utah BILLY LONG, Missouri HENRY A. WAXMAN, California, ex RENEE L. ELLMERS, North Carolina officio JOE BARTON, Texas FRED UPTON, Michigan, ex officio C O N T E N T S ---------- Page Hon. Greg Walden, a Representative in Congress from the State of Oregon, opening statement...................................... 1 Prepared statement........................................... 3 Hon. Anna G. Eshoo, a Representative in Congress from the State of California, opening statement............................... 4 Hon. Marsha Blackburn, a Representative in Congress from the State of Tennessee, opening statement.......................... 6 Hon. Henry A. Waxman, a Representative in Congress from the State of California, opening statement............................... 6 Hon. Fred Upton, a Representative in Congress from the State of Michigan, prepared statement................................... 110 Witnesses Gary Epstein, Senior Advisor and Co-Lead, Incentive Auction Task Force, Federal Communications Commission....................... 8 Prepared statement........................................... 11 Answers to submitted questions............................... 142 Harold Feld, Senior Vice President, Public Knowledge............. 14 Prepared statement........................................... 16 Answers to submitted questions............................... 145 Rick Kaplan, Executive Vice President, Strategic Planning, National Association of Broadcasters........................... 37 Prepared statement........................................... 39 Answers to submitted questions............................... 150 Preston Padden, Executive Director, Expanding Opportunities for Broadcasters Coalition......................................... 55 Prepared statement........................................... 57 Answers to submitted questions............................... 162 Kathleen Ham, Vice President, Federal Regulatory Affairs, T- Mobile......................................................... 66 Prepared statement........................................... 68 Answers to submitted questions............................... 166 Joan Marsh, Vice President, Federal Regulatory, AT&T............. 83 Prepared statement........................................... 85 Submitted Material Letter of July 19, 2013, from coalition of Fortune 100 companies to the committee, submitted by Ms. Eshoo....................... 111 Letter of July 22, 2013, from public interest groups to the committee, submitted by Mr. Waxman............................. 114 Ex parte by the U.S. Department of Justice, submitted by Mr. Waxman......................................................... 116 Letter of July 16, 2013, from eight committee members to the Federal Communications Commission, submitted by Mr. Dingell.... 140 Letter of July 22, 2013, from the Telecommunications Industry Association to the subcommittee, submitted by Mr. Walden....... 142 OVERSIGHT OF INCENTIVE AUCTION IMPLEMENTATION ---------- TUESDAY, JULY 23, 2013 House of Representatives, Subcommittee on Communications and Technology, Committee on Energy and Commerce, Washington, DC. The subcommittee met, pursuant to call, at 10:34 a.m., in room 2322 of the Rayburn House Office Building, Hon. Greg Walden (chairman of the subcommittee) presiding. Members present: Representatives Walden, Latta, Blackburn, Scalise, Lance, Guthrie, Kinzinger, Long, Ellmers, Eshoo, Doyle, Braley, Welch, Lujan, Dingell, and Waxman (ex officio). Staff present: Ray Baum, Senior Policy Advisor/Director of Coalitions; Sean Bonyun, Communications Director; Matt Bravo, Professional Staff Member; Megan Capiak, Staff Assistant; Andy Duberstein, Deputy Press Secretary; Kelsey Guyselman, Counsel, Telecom; David Redl, Counsel, Telecom; Charlotte Savercool, Executive Assistant, Legislative Clerk; Shawn Chang, Democratic Senior Counsel; Patrick Donovan, Democratic FCC Detailee; Roger Sherman, Democratic Chief Counsel; and Kara Van Stralen, Democratic Policy Analyst. OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON Mr. Walden. I will call to order the Subcommittee on Communications and Technology, and welcome our witnesses for our hearing on ``Oversight of the Incentive Auction Implementation.'' So the subcommittee meets today to continue our oversight of the FCC's progress in implementing the incentive auction legislation that Congress passed last year. As you know, a successful broadcast incentive auction has the potential to bring significant revenue from the sale of the spectrum to bear on our Nation's broadband spectrum crunch, unleash innovation for consumers, create hundreds of thousands of jobs for Americans, provide funding to begin the process of building out a nationwide interoperable public safety broadband network, and make significant contributions to reducing the Nation's deficit. But as with most things, the devil is in the details. We convened all five sitting FCC commissioners last December for a progress report on the implementation of the law. This was a first step in making sure that the Commission stays on track and acts within the confines of the law. In order to ensure that the FCC continues to follow the law, proper oversight is necessary. A successful auction will require the FCC to get two parts of the equation correctly: the broadcast side and the broadband side. Now for broadcasters, the intent of the law could not be more clear. For those that plan to exit the market, the FCC has an obligation to let the market work. I am sure the Commission seems to be contemplating its judgment for that of the market when it comes to placing a value on a broadcast license. For the incentive auction to be successful, broadcasters that participate should be assured that they will be compensated based on the market value of their licenses as determined by the auction, not based on estimates by the FCC. The auction is voluntary, and we should askance at FCC policies that would dissuade participation. Now for those who remain in the business of broadcasting, I have been equally clear what I believe is needed, and the statute is clear what they deserve is certainty. Broadcasters should be assured they will be able to remain viable following the auction. That means the Commission must provide the certainty that broadcasters in the border states will not be interfered with by our neighbors to the north and south. But beyond the statutory requirements, it means the FCC should take into consideration the unique challenges across the country as they reclaim broadcast spectrum and repack existing channels. For example, although ineligible to participate in the auction, low-powered translators play a unique role in states in the mountain west. The Commission should consider the ongoing need for translators as they conduct the repacking analysis. On the broadband side of the equation, the Commission should carefully consider how best to promote participation in the auction in a way that is consistent with the Communications Act. Ultimately, a successful auction will be dependent on both broadcast and broadband interest. The FCC would be wise to recognize that in an industry as competitive as commercial wireless, rarely does the industry speak with a single voice. That is why I am encouraged that a large portion of the industry and broadcasters seems to be coalescing around a band plan that promotes competition and maximizes auction proceeds. So I would like to have seen the FCC focus on these aspects in their recent public notice on band plans. Finally, I would like to talk for just a moment about the auction participation. Just like the broadcasters, potential broadband licensees should be courted as participants and not subjected to economic manipulations at the hands of the FCC. As we have learned time and again in spectrum auctions, well- meaning FCCs have tried to place conditions on auctions in an effort to engineer what it deemed a pro-competitive outcome. Recently, some have suggested the FCC can place restrictions on auction participation without any adverse effect on auction proceeds. It would be folly at best for the FCC to think that it could know better than the true market-based auction the maximum amount the auction could raise. Carefully crafted auction that recognizes the value of participation and has the humility to let the market decide the value of spectrum will best serve all the goals of the legislation. So our witnesses today represent the many sides of this debate. Broadcasters that want to sell and broadcasters that want to broadcast, two of our Nation's four largest wireless providers, a representative of the public interest community, and the Federal Communications Commission. While our witnesses may not see eye-to-eye on all the issues we will discuss, I look forward to your testimony--I have read it--and your counsel as we all work together on this. I know that we share a desire to see a successful broadcast incentive auction. I thank you all for being here today. [The prepared statement of Mr. Walden follows:] Prepared statement of Hon. Greg Walden The subcommittee meets today to continue our oversight of the FCC's progress in implementing the incentive auction legislation Congress passed last year. A successful broadcast incentive auction has the potential to bring significant spectrum to bear on our nation's broadband spectrum crunch, unleash innovation for consumers, create hundreds of thousands of jobs for Americans, provide funding to begin the process of building out a nationwide public safety broadband network, and make a significant contribution to reducing the deficit. But as with most things, the devil is in the details. We convened all five sitting FCC commissioners last December for a ``progress report'' on the implementation of the law. This was a first step in making sure that the commission stays on track and acts within the confines of the law. In order to ensure that the FCC continues to follow the law, proper oversight is necessary. A successful auction will require the FCC to get two parts of the equation right: the broadcast side and the broadband side. For broadcasters, the intent of the law couldn't be more clear. For those that plan to exit the market, the FCC has an obligation to let the market work. I am concerned that the commission seems to be contemplating inserting its judgment for that of the market when it comes to placing a value on a broadcast license. For the incentive auction to be successful, broadcasters that participate should be assured that they will be compensated based on the market value of their licenses--as determined by the auction--not based on estimates by the FCC. The auction is voluntary and we should look askance at FCC policies that would dissuade participation. For those that remain in the business of broadcasting, I have been equally clear what I believe is needed--and the statute is clear what they deserve--is certainty. Broadcasters should be assured that they will be able to remain viable following this auction. That means the commission must provide the certainty that broadcasters in the border states will not be interfered with by our neighbors to the north and south. But beyond the statutory requirements, it means the FCC should take into consideration the unique challenges across the country as they reclaim broadcast spectrum and repack existing channels. For example, although ineligible to participate in the auction, low-power translators play a unique role in states in the mountain west. The commission should consider the ongoing need for translators as they conduct their repacking analysis. On the broadband side of the equation, the commission should carefully consider how best to promote participate in the auction in a way that is consistent with the Communications Act. Ultimately, a successful auction will be dependent on both broadcast and broadband interest. The FCC would be wise to recognize that in an industry as competitive as commercial wireless, rarely does the industry speak with a single voice. That's why I am encouraged that a large portion of the industry--and broadcasters--seems to be coalescing around a band plan that promotes competition and maximizes auction proceeds. I would like to have seen the FCC focus on these aspects in their recent public notice on band plans. Finally, I would like to talk for just a moment about auction participation. Just like the broadcasters, potential broadband licensees should be courted as participants not subjected to economic manipulation at the hands of the FCC. As we have learned time and again in spectrum auctions, well- meaning FCCs have tried to place conditions on auctions in an effort to engineer what it deems a ``pro-competitive outcome.'' Recently, some have suggested that the FCC can place restrictions on auction participation without any adverse impact on auction proceeds. Let me be clear: it would be folly at best for the FCC to think that it could know better than a true market-based auction the maximum amount the auction could raise. A carefully crafted auction that recognizes the value of participation and has the humility to let the market decide the value of spectrum will best serve all of the goals of the legislation. Our witnesses today represent the many sides of this debate. Broadcasters that want to sell and broadcasters that want to broadcast; two of our nation's four largest wireless providers; a representative of the public interest community; and, the Federal Communications Commission. While our witnesses may not see eye to eye on all of the issues we will discuss, I look forward to their testimony and counsel and know they share our desire to see a successful broadcast incentive auction. # # # Mr. Walden. I would yield the balance of my time to the vice chair of the subcommittee, Mr. Latta. Mr. Latta. Well thank you, Mr. Chairman, and thank you very much for holding this very important hearing today. Spectrum has been a priority for this subcommittee over the past several years, and it is incumbent upon Congress to exercise oversight over the incentive auction. The Spectrum Act passed as part of the Middle Class Tax Relief and Job Creation Act in 2011 was landmark legislation with the authorization of the broadcast spectrum incentive auction. The success of this auction, which will be the most complicated the world has ever seen, is absolutely critical for bringing more spectrum to the market for mobile broadband as well as for funding our nationwide public safety broadband network. There is no question that success hinges on the incentive auction's design. I look forward to hearing from each of our distinguished witnesses on the incentive auction implementation and the benefits or consequences of the certain auction designs. I look forward to the testimony, and as we continue this very critical dialogue. And with that, Mr. Chairman, I yield back the remainder of my time. Mr. Walden. Gentleman yields back his time. Chair now recognizes the gentlelady from California, Ms. Eshoo, the ranking member, for 5 minutes. OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA Ms. Eshoo. Thank you, Mr. Chairman. Good morning to all of my colleagues and to those that are testifying today. As former FCC Chairman McDowell wisely stated last year, the upcoming voluntary incentive auction will ``literally be the most complex spectrum auction in world history.'' To drive new investment, create jobs, and spark a new era of wireless broadband, we need to make sure this auction is done right the first time. We have to get this right. We all know the storyline by now. Consumer demand for wireless broadband continues to skyrocket. More than half of all Americans now own a smartphone and as the number of wireless devices increases, so has data consumption. Last year alone, mobile devices in the U.S. downloaded more than 1.4 trillion megabits of data. That is nearly four times more demand than in 2010, and 2010 was not all that long ago. As the FCC structures its auction rules and band plan to meet this growth, there are two areas that deserve enhanced attention. First, with a rare opportunity to auction beachfront spectrum under 1 gigahertz, we must promote a competitive wireless landscape in which carriers of all sizes, both regional and national, have an opportunity to bid competitively for licensed spectrum. Today in the top 10 U.S. markets, the two largest wireless carriers control 86 percent of all beachfront spectrum below 1 gigahertz. As the Department of Justice observed earlier this year, an auction that protects and promotes a healthy, competitive wireless marketplace enhances consumer choice and serves the public good. Consistent with statute, the FCC should heed this advice by developing rules that promote competition and broad carrier participation. Second, the FCC should structure a band plan that ensures a nationwide block of spectrum under 1 gigahertz dedicated for unlicensed innovation. The economic benefits of such an expansion are well-documented with recent studies concluding that the unlicensed wireless sector contributes between $50 and $100 billion per year to the U.S. economy. That is with a B. That is not million, that is billion. Just this month, West Virginia University became the first university in the country to use TV white spaces to deliver wireless broadband service across the campus. Following on the successes of WiFi, Bluetooth, and RFID, the upcoming incentive auction can provide a unique opportunity to fuel a new generation of unlicensed technologies, supporting rural broadband, connected hospitals, smart grid networking, and so much more. So I thank all of the witnesses that are here today to share your perspectives. I look forward to your testimony that will support our subcommittee's ongoing oversight. Ms. Eshoo. I don't know--where is the clock? With that, I would like to yield the balance of my time to my colleague, Mr. Doyle. Mr. Doyle. I thank my friend. This is a critical time for the future of competition in the wireless marketplace. Large carriers currently hold over 80 percent of the licenses for spectrum below 1 gigahertz. This spectrum provides the best in-building coverage, something that is crucial in urban areas, like many parts of my district in Pittsburgh. The increasing disparity in carrier spectrum assets which the Department of Justice and the Commission have both recognized, presents significant risks such as slowing innovation, stifling price and service competition. If we are going to ensure more competitive mobile services marketplace, the Commission must ensure that all carriers have the opportunity to acquire high quality spectrum to meet the skyrocketing demand for mobile broadband services. In the Spectrum Act we passed last year, we specifically preserved the Commission's authority to adopt and enforce rules concerning spectrum aggregation that promote competition. Holdings of lower band spectrum are already dangerously concentrated. I hope the FCC uses its authority to prevent further concentration in this upcoming incentive auction. With that, I yield back my time and thank my colleague and friend, Ms. Eshoo. Ms. Eshoo. Mr. Chairman, may I just submit something for the record? This is a letter from a broad coalition of Fortune 100 companies, rural wireless carriers, and small businesses who believe every wireless carrier should have a fair opportunity to compete in the upcoming auction. Mr. Walden. Without objection. [The information appears at the conclusion of the hearing.] Ms. Eshoo. Thank you. Mr. Walden. Gentlelady yields back her time. Turn now to the vice chair of the full committee, Ms. Blackburn, from Tennessee, for 5 minutes. OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE Mrs. Blackburn. Thank you, Mr. Chairman, and I want to thank each of you for being here. I have to tell you, we all have questions and we are looking forward to having your feedback today as we look at what we think is a pretty important issue, and that is the spectrum auctions. There are questions that are unanswered regarding both the policy and the process. We are hoping that we can clear up some of those. We think the law is clear and if we follow the law, then we are going to have a successful auction. And if we don't, then I think that we are pretty much guaranteed to fail. It is important for us to keep in mind also that going through the spectrum auction process, this is not a science fair project, and we want to make certain that we do our due diligence. This is going to be a complicated process and it doesn't mean the FCC should exclude participants in order to show favoritism to certain telecommunication competitors. Gerrymandering the auctions, particularly the below 1 gigahertz level, to give regulatory favor to some competitors at the expense of those who have earned their success puts all of the work that we have done up to this point at risk. It violates the law and it also threatens our ability to stand up the public safety network, to provide revenue for deficit reduction, and to find a repacking solution. So we are going to have a lot of questions for you today. Again, I thank you all for being here, and we look forward to proceeding in an orderly manner. And I yield back--I will yield time to Mr. Long, Ms. Ellmers, whomever is---- Mr. Walden. If either of you seek time? If not---- Mrs. Blackburn. If no one is seeking time, I will yield back. Mr. Walden. Yield back. Chair now recognizes former chairman of the committee, the gentleman from California, Mr. Waxman, for 5 minutes. OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA Mr. Waxman. Thank you, Mr. Chairman. Today we continue our oversight of the FCC's implementation of the public safety inspector MACT that Congress passed last year with strong bipartisan support, and I want to thank Chairman Walden for working with us to assemble an outstanding panel of witnesses. We are delighted to have you all here. We will hear divergent views today on how the auction should be implemented, but equally strong, we will hear agreement that we have a need to make this groundbreaking auction a success. When Congress enacted this landmark legislation, we knew that implementation would be challenging. The FCC quickly retained a group of world class experts to help design the complex spectrum auction, and the FCC staff immediately started working around the clock to get this right. I want to thank the dozens of FCC staffers who have worked so hard to address the challenges posed by this auction. In my view, the success of the auction will be measured by how well we meet the goals laid out by the law. Congress enacted the law with multiple goals in mind: to help relieve the spectrum crunch, and to meet the exploding demand of wireless data, to raise revenue, to fund multiple public priorities, including the creation of the broadband network for first responders, or FirstNet, to promote competition in the wireless marketplace, and to spur continued innovation such as the creation of new super Wi-Fi services. The law we passed reflects all of these goals. To promote competition, the law expressly preserves the ability of the FCC to establish limits on spectrum aggregation where necessary to ensure competition. To promote innovation, the law called for the establishment of a nationwide guard bands that can be used for unlicensed use. Not surprisingly, some parties are now engaged in revisionist history, suggesting that the FCC has less authority than the statute provides. Others are trying to erect straw men, arguing that proponents of a competitive auction want to exclude AT&T, Inspect, and Verizon from bidding. No party that I am aware of is urging the FCC to exclude the biggest wireless companies from participating in the auction. In fact, my own view is that both companies should be able to compete in the auction. But it makes no sense to allow the two biggest companies with an already dominant market position to acquire all of this high quality beachfront spectrum. The Justice Department wrote the FCC earlier this year to emphasize how important it is for competition and consumers that this low band spectrum not be dominated by the two big carriers. This expert views from the antitrust division deserve careful consideration. Others have challenged the creation of guard bands, but guard bands are important to enhance the value of the spectrum being auctioned, and to create spectrum that can be used for the next generation of Wi-Fi services. The FCC's job will not be easy, but the goals of the statute are the right ones and they are all achievable. With carefully designed rules, the FCC can make new spectrum available to wireless carriers, raise the revenue needed for FirstNet, and promote competition and innovation. Our job should be to resist the importuning of special interests and help the FCC make this groundbreaking auction an historic success. I look forward to the testimony of our distinguished witnesses, and I would like to ask unanimous consent to put two documents into the record. One is a letter from public interest groups, Public Knowledge, The New America Foundation, the National Hispanic Media Coalition, Free Press of the Writers Guild of America, in support of pro-consumer limitations on spectrum concentration as part of the auction of the 600 megahertz band by the FCC. Mr. Walden. Without objection. [The information appears at the conclusion of the hearing.] Mr. Waxman. And the second is to enter into the record an ex parte by the U.S. Department of Justice concluding that the rules for the 600 megahertz auctions are necessary to ensure competition in the wireless market. Mr. Walden. Without objection. [The information appears at the conclusion of the hearing.] Mr. Waxman. Thank you, Mr. Chairman. I yield back the balance of my time. Mr. Walden. Gentleman yields back the balance of his time. Now we will turn to our distinguished panel of witnesses who have agreed to provide us with great testimony and counsel today. We appreciate you all being here. We will start with Gary Epstein, who is the Senior Advisor and Co-Lead of the Incentive Auction Task Force, the Federal Communications Commission, the man who has the biggest weight on his shoulder to do it all, and do it all right, make it all work. Mr. Epstein, thanks for the work you are doing for the country at the FCC. We look forward to your comments today, sir. STATEMENTS OF GARY EPSTEIN, SENIOR ADVISOR AND CO-LEAD, INCENTIVE AUCTION TASK FORCE, FEDERAL COMMUNICATIONS COMMISSION; HAROLD FELD, SENIOR VICE PRESIDENT, PUBLIC KNOWLEDGE; RICK KAPLAN, EXECUTIVE VICE PRESIDENT, STRATEGIC PLANNING, NATIONAL ASSOCIATION OF BROADCASTERS; PRESTON PADDEN, EXECUTIVE DIRECTOR, EXPANDING OPPORTUNITIES FOR BROADCASTERS COALITION; KATHLEEN HAM, VICE PRESIDENT, FEDERAL REGULATORY AFFAIRS, T-MOBILE; AND JOAN MARSH, VICE PRESIDENT, FEDERAL REGULATORY, AT&T STATEMENT OF GARY EPSTEIN Mr. Epstein. Thank you very much. Good morning, Chairman Walden and Ranking Member Eshoo, and members of the subcommittee. My name is Gary Epstein. I am the Senior Advisor and Chair of the Federal Communications Commission Incentive Auction Task Force. Thank you for the opportunity to discuss the Commission's efforts to carry out Congress' statutory direction in designing and implementing the broadcast television spectrum incentive auction. In our effort to design and implement the incentive auction, the Commission is guided by four primary public interest objectives. One, relieving the spectrum crunch by creating a market-based process for repurposing the maximum amount of UHF spectrum for licensed and unlicensed flexible use to address the expected growth in mobile data usage, which is predicted to grow by a factor of nine by 2017. Two, fulfilling our statutory obligations and congressional objectives that include reimbursing repack broadcasters, funding FirstNet, and deficit reduction. Three, providing a unique financial opportunity for participating broadcasters while preserving our healthy broadcast services for those who choose not to contribute their spectrum. And four, promoting the innovation in a vibrant mobile market. As we pursue these objectives, we are focused on both the engineering and economics issues, and are drawing on the expertise of the world's leading economists, auction design experts, and engineers, both inside and outside the agency. We are engaging with all interested parties in an open and transparent process in which we will learn from the robust public record we are building, aim for simplicity, and adjust our proposals as necessary to ensure that the auction succeeds. With respect to process, it is also important to remember that we are in the middle of an open proceeding and the Commission has made no final determinations. The staff's role in the incentive auction proceeding, under the direction of the Commission, is to conduct as comprehensive and exhaustive an examination of the full range of policy options as practicable in order to best advise the Commission. Ultimately, within the bounds of the statute, it is the Commission that will determine the design of the incentive auction. The Commission has moved swiftly since Congress passed the Spectrum Act. A guiding principle has been to ``get it done on time and to get it done right.'' Under Acting Chairwoman Clyburn, the staff has continued our steady progress toward a 2013 report and order and a 2014 auction. In the first 6 months after the Act was passed, the Commission quickly formed a cross-agency task force, retained auction design experts, adopted a channel sharing order, and officially launched the proceeding by adopting a comprehensive and specific notice of proposed rulemaking. Since adopting the Notice, we have hosted several workshops and participated in numerous industry conferences, both to inform the public about the proceeding and solicit input on distinct incentive auction issues. To date we have had workshops on channel sharing, reimbursement for relocation costs, auction design, the band plan, and the Notice itself. In addition, in the interests of public engagement and an open, transparent and participatory process, the Commissioners and staff have participated in over 180 incentive auction- related events and meetings since the enactment of the Spectrum Act, including numerous discussions with our colleagues in Canada and Mexico. Perhaps unsurprisingly, the Task Force has met with each of my fellow panelists numerous times to discuss their particular views with respect to the auction. Since the Notice, we have also released several public notices on issues we believe warranted further consideration and opportunity for interested parties to provide additional input. To date, we have received and considered over 460 comments and reply comments to incentive auction public notices. Our public notices have solicited input on interference calculation software, band plan design, and in the case of a public notice we released just yesterday, the repacking process. Yesterday's release includes the results of a preliminary analysis of whether any particular television station could be assigned or reassigned to particular channels in the incentive auction repacking process, consistent with statutory and other requirements. Each public notice we have issued has proven critical to advancing the proceeding, and we expect that yesterday's release, which was only the first of several public notices we expect to issue regarding repacking, will allow interested parties to better understand some of our preliminary efforts in developing a repacking methodology and elicit valuable comments on our proposals. Finally, we are committed to an open, transparent, and inclusive process. On several issues it appears there is emerging some agreement on how to move forward. On other issues, stakeholders appear to be coming to general agreement on the surface, but there remain important differences of opinion in the details. And on some important topics there remain divergent positions. The key for the Commission is to continue to solicit and carefully review ideas from the experts, both outside and within the Commission, to enable the Commission to make the hard decisions based on the best available data and ideas. The Incentive Auction Task Force will make recommendations to the full Commission that we believe will result in an auction that will serve the public interest and achieve the objectives and goals Congress laid out in the Spectrum Act. The ideas we put forth for the Commissioners to consider will be based on substantial and valuable input from the public. Thank you and I look forward to your questions. [The prepared statement of Mr. Epstein follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Walden. Mr. Epstein, thank you, and again, thank you for what you and your team are doing to try and get this right and get it done on time. So we appreciate that. Mr. Epstein. Thank you, Mr. Chairman. Mr. Walden. We are going to go now to the Senior Vice President of Public Knowledge, Mr. Harold Feld. We appreciate your being back before our subcommittee to testify, and we look forward to your comments. STATEMENT OF HAROLD FELD Mr. Feld. Thank you very much, Chairman Walden, Ranking Member Eshoo. Thank you for inviting me here to testify today. Two years ago, I testified before this subcommittee that a properly structured incentive auction could be a rare public policy trifecta, a win-win-win that provided more licensed spectrum, more efficient access to unlicensed spectrum in this extremely useful set of frequencies. In addition to raising revenue for an interoperable public safety network, now called FirstNet, the auction of licenses in this band for mobile broadband could also enhance competition to the benefit of consumers. At the same time, while reallocation of a portion of the TV band from broadcasting to licensed wireless service would mean the loss of spectrum for white spaces in some areas that raise the possibility of creating more access in crowded urban markets. Through the reallocation of the spectrum and subsequent repacking of the remaining broadcasters, the FCC could create a national unlicensed band that would encourage developers to build new devices and offer more innovative services that take advantage of the unique properties of these frequencies. The last 2 years have proved both the importance of unlicensed access, especially in the TV bands, and the importance of stimulating competition on the licensed side. In this time period, we have seen the cable industry recognize the value of offering unlicensed access as a supplement for their broadband networks. Ad hoc unlicensed networks proved their value in the aftermath of Superstorm Sandy. We now talk of carrier grade Wi-Fi as a critical tool for the wireless industry. Wireless ISPs are using unlicensed spectrum, including TV white spaces, to bring affordable broadband to rural America. We have also seen the value of regulatory steps to promote competition. In 2011, the FCC imposed data roaming rules, and with the Department of Justice, jointly blocked the effort of AT&T to acquire T-Mobile. In 2012, they pushed Verizon to divest spectrum to competitors as part of its acquisition of spectrum co-licenses. As a result, we have seen more investment in the wireless market in the last year than we had for many years before. Billions of dollars of new investment float into the market as both T-Mobile and Sprint attracted new interest. These revitalized competitors have offered new equipment plans and service plans, and in response, AT&T and Verizon have redoubled their efforts to deploy 4G LTE networks as rapidly as possible and respond with their own new pricing plans. In short, competition works and needs to be preserved. All of this highlights the importance of getting rules for this incentive auction right. The Department of Justice has identified access to low band spectrum as critical for competition. This spectrum is highly valued for its propagation qualities, its ability to travel long distances and penetrate buildings and trees. Companies looking to invest in unlicensed, such as Comcast, Google, and Microsoft have likewise identified the broadcast band as critical for developing the next generation of unlicensed services. What does getting it right mean? First, it means we must stop creating false choices and pushing the FCC to choose sides. Congress passed a compromised bill that gave the FCC the authority to use the auction to enhance unlicensed and promote competition, but within limits. We should collectively embrace this compromise rather than refighting old battles. The priorities of this auction must work together, not push against each other and fly apart. Second, we need to respect the FCC staff as they work through this difficult process. We cannot have the transparency and trust we need if people unhappy with the substantive choices browbeat them over procedure. We should recognize that well-structured guard bands will both provide adequate spectrum for unlicensed use and increase the value of the service as a whole. This is not about artificially inflating guard bands to the point where it would undermine the license service; this is about being mindful to achieve all our goals. Instead of setting this up as a false choice where every megahertz of guard band is seen as lost revenue, we should recognize that well-structured guard bands will serve the interest of licensed and unlicensed users alike. Finally, we need to make sure that we have enough participation in the auction to make it worth holding. The best way to ensure that enough bidders to show up is what we call a ``No Piggies Rule.'' Don't ban anyone from the auction, but limit the number of licenses that any one company can win. Opponents of a No Piggies Rule argue that we need to have AT&T and Verizon in the auction. That is true, but the beauty of the No Piggies Rule is it lets AT&T and Verizon participate; it just makes sure there are enough licenses to make it worthwhile for competitors to show up as well. An auction with only AT&T and Verizon will be just as much a failure as an auction that banned AT&T and Verizon. To conclude, the key to a successful incentive auction is a balanced approach. We get there by continuing our current deliberative process. We can still achieve a public policy trifecta, a win-win-win for mobile broadband competition and unlicensed access and build an interoperable public safety net that we all need. It would be a shame to miss this chance by fighting old battles instead of working together. Thank you, and I look forward to your questions. [The prepared statement of Mr. Feld follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Walden. Mr. Feld, thank you for your testimony. We will now go to Mr. Rick Kaplan, who is the Executive Vice President, Strategic Planning, at the National Association of Broadcasters. Mr. Kaplan, welcome back. We look forward to your testimony as well. STATEMENT OF RICK KAPLAN Mr. Kaplan. Good morning, Chairman Walden, Ranking Member Eshoo, and members of the subcommittee. Thank you for inviting me on behalf of the National Association of Broadcasters to testify before you today. NAB is committed to lending its expertise to the subcommittee and the FCC to ensure the successful completion of the world's first ever broadcast incentive auction to the benefit of America's consumers, the U.S. Treasury, and public safety. A properly run auction is also critical to the future of the Nation's broadcast industry. Now, a casual observer of today's hearing might be led to believe that the upcoming incentive auction is primarily a wireless industry issue. He or she will hear about licensed and unlicensed spectrum, spectrum aggregation limits, and the drive to maximize the amount of spectrum freed up by paying handsomely private equity funds and others on the fringes of broadcasting to relinquish spectrum. The reality, however, is that the industry on which this auction will have the greatest impact is the broadcast industry. To offer some perspective, according to OSTP and the National Economic Council, the U.S. commercial wireless industry will soon control more than 660 megahertz of spectrum, more than any other commercial enterprise, and well more than its counterparts in nearly every other country. This amount is more than double the spectrum allocated to the broadcast industry, and that is before the incentive auction. In fact, a wildly successful incentive auction will likely contribute less than 15 percent of new spectrum to the wireless industry's overall stockpile. By contrast, this auction will leave an indelible mark on the broadcast industry. Some 30 percent of the channels on which broadcasters operate will be gone, and we will have to reallocate upwards of 50 percent of the stations that remain on the air. Moreover, potential changes to our coverage areas could greatly impair the ability of a significant number of the nearly 60 million Americans who rely exclusively on over-the- air television to receive the local stations they count on most. Our goal at NAB is to help those broadcasters who remain on the air continue to have the same opportunities to serve the American people they had prior to the auction: the opportunity for the station in Boston to offer wall-to-wall coverage of the terrifying bombings, the opportunity for the Tri-State area station to help direct local residents to lifesaving services during Hurricane Sandy, and the opportunity for the station in Oklahoma to warn its viewers about the path of deadly tornadoes. Some have described this auction as a win-win-win, although with the final victory being awarded to the broadcasters. To be candid, from what we have seen so far, we will be lucky to escape with a tie. In any event, to avoid a loss for the broadcast industry, the FCC must ensure three things. First, broadcasters who remain on the air should not be harmed by the voluntary auction. The Spectrum Act dictates that broadcasters must be able to serve the same coverage area and same viewers they did the day after the auction as they did the day before. The FCC should not, for example, move the goalpost by altering the formula by which they calculate these coverage areas. No harm also means that the FCC should not force remaining broadcasters to go out of pocket for reasonable expenses when they are forced to make way for the wireless industry. The Commission must treat the TV Broadcaster Relocation Fund as its relocation budget. If not, broadcasters could face significant costs associated with moves they never sought and that offer them no benefits whatsoever. Second, the Commission must develop a band plan that avoids interference between broadcasters and wireless operators. The engineering behind the FCC's variable plan has not yet been vetted in an open forum, and the time has come to put the staff's engineering assumptions to the test. As we know from experience, post-auction interference problems take far longer to fix than if they had been addressed openly, transparently, and thoroughly up front. For the same reason it is essential that the FCC complete international coordination prior to the auction and repacking, an unfinished product leaves the Commission with far less revenue and also forces the Commission into a jagged variable band plan where it has to match broadcasting wireless services in an unprecedented manner across the northern third of the Nation. Third, despite the fact that low power television and TV translators are not formally protected in the statute, the Commission must nevertheless do all it can to preserve these critical services. As last week's letter signed by 57 House members representing rural and mountainous districts made clear--and I would like to submit that letter for the record, if possible---- Mr. Walden. Without objection. Mr. Kaplan. Translators are indispensable means by which rural communities, especially out West, receive their free over-the-air news, weather, and emergency news information. Also at a time where the Commission and many Members of Congress have expressed concerns about diversity in media ownership or programming, low power television provides one important answer. If the Commission repacks too aggressively, literally thousands of translators and many more low power television stations will disappear and never return. In closing, the NAB continues to vigorously support the voluntary market-based incentive auction authorized by Congress and to see it conducted as expeditiously as possible. But we must also remember that getting it done right is more important than simply getting it done right now. Our aim is to preserve a healthy and robust broadcast industry and to continue to serve our local communities in a way that no other service can duplicate. Thank you again for the opportunity to testify, and I look forward to your questions. [The prepared statement of Mr. Kaplan follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Walden. Thank you, Mr. Kaplan. We appreciate your counsel. Now we will turn to Preston Padden, the Executive Director, Expanding Opportunities for Broadcasters Coalition. Mr. Padden, welcome back and we look forward to your comments. STATEMENT OF PRESTON PADDEN Mr. Padden. Thank you, Chairman Walden and Ranking Member Eshoo and members of the subcommittee. My name is Preston Padden and I am the Executive Director of the Expanding Opportunities for Broadcasters Coalition of more than 70 television stations interested in participating in the auction, under the right conditions. Chairwoman Clyburn has provided great leadership in moving this auction forward. Commissioners Pai and Rosenworcel are very constructively engaged in these auction issues. Auction Chair Gary Epstein, Bureau Chiefs Ruth Milkman, Bill Lake, and Julius Knapp are working diligently to develop recommendations for the auction design and rules. We are cheerleaders for this auction. In 2014, the FCC can reallocate the full 120 megahertz in the National Broadband Plan, even in the largest markets, as we would be happy to demonstrate in detail to the committee staff. The number one challenge facing the FCC is to make sure that payments to broadcasters are sufficiently large to induce a substantial number of TV spectrum sellers to participate in the auction. If a large number of TV stations offered to sell their spectrum, the FCC will succeed in reallocating 120 megahertz and in raising the revenues necessary to pay the selling TV stations, pay the repacking expenses of non-participating stations, fully fund FirstNet, and contribute to deficit reduction. If an insufficient number of TV spectrum sellers participate, the auction will fail at its inception, and there will be no need to debate other issues such as band plans and wireless carrier eligibility. All TV stations enjoy a range of attractive alternatives other than participating in the incentive auction. To be sure, economists and lawyers easily could construct rules and auction designs such as scoring stations and weighting the auction that would have the effect of limiting payments to potential TV spectrum sellers. But this would lead to less spectrum being offered, less spectrum being reallocated, and less revenue being generated. Prominent legislators of both parties have expressed their concerns about counterproductive proposals to diminish incentives. On March 13, Chairman Walden issued a statement noting ``without broadcasters, there is no spectrum to auction,'' and adding ``it would be foolhardy to limit the incentives from the get-go.'' On June 4, the chairman emeritus of the full committee, Congressman Dingell, wrote a letter asking the FCC to estimate the effect of scoring and weighted auctions on the number of participating TV spectrum sellers and on the amount of spectrum recovered. The FCC will be buying spectrum, not TV station businesses. Scoring based on characteristics of the station is irrelevant to the auction, and the statute authorizes the FCC to pay stations based on competitive bidding, not based on scoring. Finally, as we understand the FCC's likely auction design, it will freeze those stations with the greatest clearing and repacking impact at high-priced early rounds of the auctions, while stations with lesser clearing and repacking impact continue to descend to lower priced rounds, thereby automatically paying more to the stations most important to the FCC's clearing goal. Simply put, the FCC should offer the same high initial prices to all stations in the same market and rely on the statutorily prescribed auction to discipline final prices. We urge the Commission to provide broadcasters with more information about auction design and rules. If there are border markets where the FCC cannot recover 120 megahertz at this time, we support a variable band plan to avoid a lowest common denominator limitation on nationwide spectrum recovery. The FCC should allow stations to channel share with any other station in their DMA, and to change their city of license to match the host sharing partner. The FCC should continue its productive discussions with Mexico and Canada without making the final conclusion of those discussions an obstacle to holding the auction in 2014, just as the FCC previously has conducted other auctions without final resolution of border issues. Finally, the clear congressional priorities of funding FirstNet and making a dent in the deficit militate against restricting participation in this auction by any wireless carrier. We need robust competition among all wireless carriers to assure that the auction produces the maximum revenues possible. Concerns about market concentration should be left to another proceeding on another day when they may well have been obviated by the recent dramatic marketplace strengthening of Sprint and T-Mobile. Thank you very much, Mr. Chairman. [The prepared statement of Mr. Padden follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Walden. Mr. Padden, thank you for your testimony. We will now move to Kathleen Ham, who is the Vice President, Federal Regulatory Affairs of T-Mobile. Welcome. STATEMENT OF KATHLEEN HAM Ms. Ham. Thank you. Good morning, Chairman Walden, Ranking Member Eshoo, and members of the subcommittee. My name is Kathleen O'Brien Ham, and I am the Vice President for Federal Regulatory at T-Mobile U.S. Thank you for inviting me to testify today. T-Mobile is the fourth largest wireless carrier, serving about 43 million subscribers and employing 38,000 people in the U.S. Since the government blocked our merger with AT&T 18 months ago, we have been reinvigorating our brand and our network. Earlier this year, we announced our uncarrier strategy, setting us apart from our larger competitors. We dropped traditional price plans in favor of affordable, simple choice plans. We said there is no need for annual service contracts anymore. We gave customers the option to bring their own device or buy one from us, interest free. We launched JUMP, so customers can upgrade their phones when they want, not when they are told. These innovative moves are putting pressure on our larger competitors who are now copying our offers. That is what healthy competition achieves. On top of all this, we are rolling out our 4G LTE at a record-shattering pace. The upcoming incentive auction is critical to the future of wireless competition. Spectrum is the air we breathe. Without it, we cannot compete and we cannot innovate. The FCC should maximize the amount of spectrum auction for mobile use. More spectrum is good for competition and good for auction revenues, plain and simple. We commend the Commission for its ongoing work to develop auction rules. To ensure the rules promote competition and consumer choice, the FCC should consider three critical objectives. First, encourage broadcaster participation to maximize the amount of spectrum auctioned. Second, adopt a 600 megahertz band plan that maximizes auctioning paired spectrum for mobile use. Finally, and most important, adopt reasonable spectrum aggregation limits so the dominant carriers do not foreclose other competitors from this last best opportunity to acquire low band spectrum. All carriers agree there needs to be competitive limits on spectrum. The only dispute is how and when to employ them. T- Mobile has proposed an overall limit on the amount of low band spectrum that any carrier can hold, and we have said no carrier would be shut out of the incentive auction in any market, even if they otherwise exceed the limit. Despite what you may be hearing, limits on spectrum concentration are consistent with Congress' 1993 directive to promote competition. It is that visionary law that is the basis of the billions of dollars in investment and the creation of millions of jobs that wireless competition has channeled into the U.S. economy for the past 2 decades. Why do we need reasonable spectrum aggregation limits? Three reasons. First, all spectrum is not created equal. The 600 megahertz spectrum penetrates buildings, is cheaper to deploy in both rural and certain urban settings. Today, the two largest carriers control about 80 percent of the spectrum below 1 gigahertz, half of which they got for free from the government in the 1980s. All carriers need a mix of both high and low band spectrum to effectively compete. T-Mobile, even with its good high band spectrum position today, holds no low band spectrum. Second, the two dominant carriers have much to lose from competition. Their market power gives them a significant incentive, an ability to acquire spectrum to block competition. By contrast, T-Mobile and other smaller carriers value spectrum solely based on its use. Without market power, you don't pay more for spectrum than the use value derived from it, no matter who your shareholders are. In a letter shared with the subcommittee yesterday, smaller and rural carriers joined T-Mobile in calling for low band limits to protect competition. Finally, up front limits enhance auction revenue. Without them, smaller bidders may decide to sit out the auction or curtail their participation. Without a doubt, this auction will have a critical impact on the competitive future. The right policy choices will foster competition and investment. The wrong choices will move us backward. Thank you for inviting me to testify today, and I am happy to take any questions. [The prepared statement of Ms. Ham follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Walden. Thank you very much, Ms. O'Brien Ham. We appreciate your being here. We now turn to Joan Marsh, who is Vice President, Federal Regulatory Affairs for AT&T. We welcome you here, Ms. Marsh, and please go ahead with your testimony. STATEMENT OF JOAN MARSH Ms. Marsh. Thank you, sir, and thank you, Chairman Walden and Ranking Member Eshoo for inviting AT&T to join in this very important discussion today. To quote former FCC Chairman Julius Genachowski, ``This is a big deal.'' The 600 megahertz auction presents the next best opportunity to reallocate valuable spectrum for wireless broadband use, and could be the only one like it for years to come. But this auction is not just about new wireless allocations; it is also about critical public safety goals. There is wide agreement that the auction must generate up to $7 billion to fund construction of the first nationwide interoperable wireless broadband public safety network. Auction revenues will also support broadcaster relocation, public safety research, next generation 911 services, and much needed deficit reduction. The importance of these goals has been underscored by both sides of the Aisle in letters to the Commission, urging them to adopt policies that will enhance the ability of the auction to meet these critical statutory goals. We agree. But success in meeting these goals is by no means a guarantee. This is, by far, the most complex auction proceeding ever undertaken, and the Commission must persuade two different sets of auction bidders to participate in two separate but interrelated auctions. In the face of this enormous complexity, there are a few key principles that should guide decision-making at every turn. You will be happy to hear I agree with two of the principles Ms. Ham expressed today. I would like to discuss how our one remaining principle in which there is some disagreement. The primary principle is straightforward: allow free and open participation in the auction by all qualified bidders. This approach is the only one that will maximize auction revenues and thereby maximize the chances for an auction that achieve all of Congress' stated goals. If qualified bidders are excluded or limited in their bidding activity, less spectrum may be relinquished by broadcasters, the spectrum that is offered will sell at lower prices, and the chances of a successful auction will be diminished. Unfortunately, as always in the case of regulatory proceedings of significant import, there are some who want the Commission to gain the rules in favor of certain competitors over others. These proposals vary in their specifics, but they share a common theme: restricting AT&T and Verizon from full participation in the auction while steering spectrum to other bidders, including Sprint and T- Mobile, neither of which participated in the last major auction. These proposals are ill-advised, as they are unlawful. For starters, we believe they are unnecessary. Sprint already has, by far, the largest spectrum portfolio of any U.S. wireless provider, vastly exceeding that of both AT&T and Verizon. Indeed, given this it is by no means certain that Sprint will choose to participate in the 600 megahertz auction. Sprint also has at its disposal substantial new capital resources from its owner, Japanese-based SoftBank to fund any future spectrum purchases it might choose to make. For its part, T-Mobile is owned by Deutsche-Telekom, one of the largest telecommunications companies in the world. It too has recently acquired substantial amounts of new spectrum, including from AT&T, Verizon, and the former Metro PCS. In fact, T-Mobile now runs ads in the marketplace claiming that its network is less congested and provides greater capacity than does AT&T's. In short, there is no basis upon which to conclude that Sprint or T-Mobile have a greater need to win spectrum at this auction than any other bidder. More importantly, to the extent these carriers choose to participate, there is no basis to conclude that they lack the resources to bid competitively and win, absent auction rules that either make it easier or cheaper for them to do so. Conversely, restricting or limiting bidder participation will come at a heavy price. If AT&T or Verizon are restricted, or relegated to a separate shadow auction with its own set of rules, spectrum values at auction will be suppressed and revenues reduced. This result would effectively ask U.S. taxpayers to subsidize the auction, undermining the auction's revenue goals, including that of deficit reduction. Such rules could also impact the calculation that broadcasters will make in deciding whether to participate or not. For these reasons, AT&T has urged the Commission to adhere to its statutory mandate and conduct an open and competitive auction that awards spectrum to the highest bidder. This approach is not only consistent with the law, but it would also offer the best prospect for a successful auction that meets all of Congress' goals. My written testimony includes comments in other areas of great interest to AT&T, including the band plan, the need to get the engineering right, the efforts of the industry to find consensus, and the role unlicensed services can play in this auction. As to broadcaster participation, AT&T believes that broadcasters who come to the auction table are not selling a broadcast business. They are relinquishing their rights to 6 megahertz of spectrum, much needed for mobile wireless use. An evaluation mechanism adopted in the reverse auction should be consistent with that reality and opening prices should be set at a level that will encourage participation. In conclusion, this auction presents enormous opportunity and risk. The stakes are as high as the issues are complex. AT&T remains confident that under the able leadership of Chairwoman Clyburn, Commissioners Pai and Rosenworcel, and Commission staff led by Mr. Epstein, the FCC will adopt auction rules that maximize participation and prospects for a successful auction, with all the intended benefits envisioned by Congress. Before I conclude, one comment on something Ms. Ham said. She indicated that we got a lot of our low band spectrum for free. That is incorrect. Although the 850 allocations were originally allocated to incumbents, those licenses have changed hands many times in the secondary market, and the vast majority of AT&T's portfolio of 850 spectrum was purchased in the secondary market, and I can assure you, we paid big values for that spectrum. I just wanted to correct that one fact, and I appreciate your time. [The prepared statement of Ms. Marsh follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Walden. Thank you, Ms. Marsh. We appreciate your testimony. Now we will go to the question phase, so again, we want to thank you all for your testimony today, and your counsel. Mr. Epstein, although ineligible to participate in the auction, low power translators play a unique role in the States, especially in the mountain West where thousands of viewers rely exclusively on translators for news and weather and emergency information. Is the FCC considering auction rules and repacking procedures that will minimize the negative impacts the auction will have on TV translators and low power TV where possible? Mr. Epstein. Mr. Chairman, Commission in its notice recognized the public interest concerns that you just stated. The Congress made the decision not to include low power and translators in the incentive auction, but it doesn't mean that they are not highly valued---- Mr. Walden. Right. Mr. Epstein [continuing]. Aspects and yes, in considering the repacking and other aspects of the incentive auction, that translators--we asked specific questions about translators and low power. One other point that I would like to quickly make---- Mr. Walden. Yes, sir. Mr. Epstein [continuing]. And that is that in our--and this may be a misapprehension on some people's part. In any of our band plan deliberations, what we are seeking to do is to have a core amount of spectrum across most of the United States. There may be some areas which are impaired because of issues which I am sure we will discuss, but in rural areas, we are not seeking to eke out the last amount of spectrum, and that is especially in recognition of the issue you just stated. Mr. Walden. I appreciate that. Thank you. Again, Mr. Epstein and Mr. Kaplan, the Spectrum Act requires the FCC to follow the methodology in OET Bulletin 69 when repacking the broadcast band. But the FCC has released multiple public notices on changes to the software and inputs it intends to use to run the repacking analysis, including the use of new data and assumptions. Mr. Kaplan, do you believe that the proposed changes to the OET 69 software comport with the Act, and Mr. Epstein, why are those changes necessary? Mr. Kaplan. I believe the changes now on the fourth round of changes as of last night are both unlawful and unwise. Mr. Walden. OK. Mr. Epstein, do you have a different view of that? Mr. Epstein. Yes, I do. I have a different view. Mr. Walden. I figured as much. Mr. Epstein. Statute requires us to maintain the methodology utilized in OET 69. We believe we are maintaining the methodology. What we are looking at is updating the inputs. We are doing such things as using 2010 census instead of 2000 census. It seems to make a lot of sense to us to update the inputs to the software. The original software is just not capable of operating with the incentive auction---- Mr. Walden. So you are making changes in the methodology? Mr. Epstein. We are not. Mr. Walden. OK. Mr. Kaplan, why do you think these are unwise, illegal, and whatever else you said? Mr. Kaplan. Well when I worked at the FCC, when Congress told us to do something, we did it. Those were the easiest times, when it was clear. Congress made it very clear as to what the FCC should do. There was a very simple methodology-- actually very complicated for most of us, but for engineers, very simple--about how to go about calculating our coverage areas. Congress was wise to not allow the FCC to move the goalpost, mostly to create certainty, which you talked about in your opening statement, about what broadcasters will participate, what won't and where we might cover. As we did our analysis on the changes that are occurring in OET 69, they become widely inaccurate. We get different results each run we do, and they surprisingly--or unsurprisingly--shrink our coverage areas quite a bit in certain areas of the country. And so therefore, we think it runs far afoul of what Congress intended. Mr. Walden. All right. We will follow up on this discussion. Mr. Epstein, the FCC staff has taken the unusual step of freezing not only new but also pending applications by TV stations to modify their viewing areas. Some of these modifications have been pending for years. These mods will allow broadcasters that wish to remain on the air to bring local news emergency information to a larger audience in local markets. Is the Commission considering any kind of analysis to determine whether some can be granted without disrupting the incentive auction? And Mr. Kaplan, do you know of an approach that would prevent the mods from making the repacking process more difficult? Mr. Epstein. Mr. Chairman, yes we are analyzing the station applications that are pending. Just two sentences worth of background. You and Congress and the statutes set a specific date for applications to be considered in the repacking. These applications were either pending or not granted by that date. The FCC found in its notice it had the discretion to grant them, but put a temporary freeze in place so we can analyze them. Mr. Walden. But you are in that process? Mr. Epstein. We are in that process. Mr. Walden. Because I would think there would be some markets as you described where---- Mr. Epstein. We have also---- Mr. Walden [continuing]. You would get into a problem. Mr. Epstein. We have also put in place a waiver request for particular hardship. So the answer to your question is yes, we are analyzing those stations. Mr. Walden. Mr. Kaplan, do you care to comment? Mr. Kaplan. Any time you freeze--and this goes for any industry--you freeze an industry from acting, you freeze investment and you freeze any outside investment, especially in that industry. And that is what is going on right now in the broadcast industry. We have actually proposed another solution, perhaps, that we hope the FCC would adopt, which is, I think-- and everyone can agree might help the process in general, which is to move forward on this portion of the incentive auction order, and not wait for issues like band plan, competition, other things, but actually adopt an order making the decisions that are--of things that are proposed in the notice of proposed rulemaking on these issues. Therefore, you won't have a need for a freeze because you will--the FCC will then have decided where they come down on what stations are protected and what stations aren't, and we would fully support that. Mr. Walden. Mr. Epstein, did you want to comment? Mr. Epstein. Just briefly. This is an overriding comment. Anything that I say with respect to recommendations ultimately has to be acted on by the Commission. Mr. Walden. Sure. Mr. Epstein. What the staff does is make recommendations to the Commission, and the Commission is the actual decision maker here. We are analyzing stations. What we are concerned about is in the process, and a complicated process like the incentive auction, we don't want to get ahead of ourselves and make decisions which we may regret later, which will completely-- which will significantly affect our repacking. So we are doing exactly as Mr. Kaplan said. We are trying to determine whether these stations will have any effect on repacking. Mr. Walden. All right. I appreciate your answers to my questions. We will now turn to the gentlelady from California, the Ranking Member, Ms. Eshoo, for questions. Ms. Eshoo. Thank you, Mr. Chairman, and thank you to each one of you. I think that this is not only a very important panel, but your testimony is--I mean, we are hanging on every word that each one of you are saying. Obviously there are differences between you. I want to go to Ms. Marsh first. There is something that is really bothering me about this is as Mr. Waxman said, a straw man being set up, that there are those that want to exclude or seeking to have AT&T and Verizon excluded from this process. There isn't anyone that has suggested that. I haven't found that. I have tried Googling it. I have asked my staff to research it. There isn't anyone that has suggested that or is for that. I think I heard a suggestion that if it isn't--if this isn't set up the way you want it, that AT&T is simply not going to participate, which I think is a threat that unless it goes exactly the way you want it, the entire auction is going to fail, that we won't be able to reduce the deficit, we won't produce the dollars for the interoperable nationwide public safety network, and the auction won't be successful. Are you actually stating that if you don't get your way that you are just not going to participate? Ms. Marsh. No, ma'am, and I apologize if I suggested that. I certainly did not suggest that AT&T will not participate. But we do believe if there are limitations imposed, even if they are not exclusions by name, they could act to exclude---- Ms. Eshoo. So let me just ask you this. If, in fact, there is not room for competition by smaller carriers, you think that the auction will fail? Ms. Marsh. No, I believe that the auction can be set up so there is room for all bidders to come and win, and that is exactly what we have seen in the last two major auctions at the FCC. Ms. Eshoo. So how, Ms. Ham, does that--I think she just said something that may please you. Ms. Ham. Yes. Well, we are in favor of broad participation, yes. I used to run the spectrum auctions program at the FCC, and I ran the early PCS auctions and I saw what a successful auction looked like. Successful auction is one where you have a lot of bidders bidding in a lot of markets, OK? That is what T- Mobile would like to see in this auction. That is what we think will be accomplished with reasonable spectrum aggregation limits. As you indicated, we and others are not saying exclude AT&T and Verizon. What we are worried about--and bear in mind, we are not even sure how much spectrum there is going to be in this auction. It all really depends on what broadcasters show up. Ms. Eshoo. Voluntary, right. Ms. Ham. And if there is less spectrum here, there is a much greater likelihood that AT&T and Verizon can divide and conquer, OK? So to Harold's No Piggies Rule, I think that is what we are talking about. Ms. Eshoo. I was waiting for someone to bring that up on the panel. Ms. Ham. I think what we are talking about--but anyway, it is ensuring that there is competition after this auction. The FCC hasn't run an auction in 5 years. This is the most important auction that they have run since the PCS auctions. Back then, there was a duopoly. There was a cellular duopoly, and guess what the Commission did? The Commission put in place reasonable aggregation limits. T-Mobile stands here today as a competitor because of that good policy. That is what we are for. Ms. Eshoo. Thank you. Mr. Epstein, this is just a curiosity question. Do you think that the FCC will meet its goal of holding the auction in 2014? Mr. Epstein. What our charges from Chairwoman Clyburn is for the staff to do whatever it can to place the options before the Commission to adopt a report and order in 2013 and to hold the auction in 2014. That is what we plan and intend to do. Ms. Eshoo. You have confidence that it can happen in 2014, though? Mr. Epstein. Whether it happens in 2014 I guess is above my pay grade, but we will do everything we can to empower the Commission to make that decision and to hold the auction. Ms. Eshoo. You are a wonderful diplomat. I think everyone in this room knows that--how strongly I feel about unlicensed spectrum, you know, the fight to get that into the spectrum bill. I think a real victory for the country that we did, and that we continue on that path to not only protect it, but enlarge it. In 2011, the Stanford Institute for Economic Policy Research--it is known at home as SIEPR--it is a very important organization at Stanford. It looked at the economic benefits of unlicensed and concluded that making more of it available would ``likely add significantly to government revenue and could result in higher auction revenue than if all new bandwidth were sold under exclusive licenses.'' Mr. Feld, do you agree with that assessment? Mr. Feld. Absolutely. We have seen historically every time that we have, you know, added more unlicensed spectrum and made that more available, it has just led to a fantastic boom in new services and new devices that product exciting new economic opportunities. '99--in '89, rather, when we first went to garage door openers; in '97 we opened up the UNII band which laid the ground work for Wi-Fi and all of the innovations that that has brought. With TV white spaces in only the short time that it has actually been available for us to certify equipment, we have got a huge backlog of orders among WISPs. We are seeing other countries in Europe, we are seeing Kenya and South Africa, New Zealand all looking at this technology with pilot projects popping up all over the world. This is just a fantastic engine of not just innovation, but also of economic opportunity and growth. Ms. Eshoo. Thank you very much. I have other questions, Mr. Chairman, but I will submit them to the witnesses. Is there a timeframe in which witnesses need to respond to us when we submit questions to them? I don't know the answer to that one. Mr. Walden. Ten days. Ms. Eshoo. Ten days? Good. OK, thank you very much. Mr. Walden. The lady's time is expired, and the chair recognizes the lady from Tennessee, the vice chairlady, Representative Blackburn for 5 minutes. Mrs. Blackburn. Thank you, Mr. Chairman. Again, I thank you all for being here. I have to tell you, it is interesting to hear such a spirited conversation, and I think that we all appreciate this. I hope we are all focused on the same goal, and that is getting this spectrum out to the marketplace so that we don't end up with a spectrum crisis. Ms. Ham, I want to come to you because I know that you all have been running an ad that claims that your network is less congested than AT&T's. And then I saw a Deutsche Bank financial statement that said Sprint is the new spectrum powerhouse and has more spectrum for LTE than all of its competitors combined. And then you are talking about AT&T being excluded. So if your ads are true, why would you not want AT&T in the spectrum auctions? Ms. Ham. Well again, to clarify, we are not talking about excluding them. In fact, it helps us to have AT&T and Verizon in our neighborhood, OK? I mean, we were the leaders of building out AWS spectrum. We did that alone, OK? It helps to have your competitors out there buying from vendors, et cetera, et cetera. It brings down the costs so we want them in the neighborhood, OK? That is not what this is about. And you know, in terms of our ads, none of those ads--I mean, T-Mobile, going back 18 months I think I referenced since our deal, so we got some spectrum from AT&T as part of that deal, OK? We got some spectrum from Verizon as part of the Verizon spectrum co-deal, and we recently merged with Metro PCS. So we are in a stronger position than we were 18 months ago---- Mrs. Blackburn. Let me ask you this, then. Ms. Ham [continuing]. With upper band spectrum. Mrs. Blackburn. OK. Then if the sub-1 gigahertz spectrum is so important, then why did T-Mobile--why didn't they even participate in the 700 megahertz auction? Ms. Ham. Sure, thank you. Well first of all, with all due respect, I think we have to take the market as it is today, not as it was in 2006. The market has changed dramatically since then. There were barely even smartphones back in 2007. T-Mobile did participate in the 2006 auction, and we very aggressively built that spectrum out. That spectrum was encumbered with 22 federal agencies, OK? We were deep in the throes of that and I know we visited a lot of your offices during that time about that issue, because clearing the Department of Justice and the Department of Defense is no easy job, OK? So the other thing I would say is we have to take the spectrum in the order we get it, OK? The 700 megahertz auction came after the AWS auction. At the time the AWS auction occurred, T-Mobile was hot to trot to get our 3G spectrum so we could compete with these guys, OK? That was the spectrum that was on the auction block. We put our resources into it and we put our resources into clearing it. And today, we are using that spectrum. We are probably using it the most of anybody. That is our LTE spectrum. So T-Mobile knows how to get its spectrum and use its spectrum, but we don't have any low band spectrum, and low band spectrum is what this auction is about. Mrs. Blackburn. OK. Now Mr. Feld has his hand up and I am going to recognize him, even though he has a No Piggies Rule and he is trying to hog the time. So Mr. Feld, I am going to recognize you for your comments, but then also in your written testimony, you were comparing the auction if AT&T and Verizon were in it, it would be akin to the Boston Celtics trying to play an amateur team. I am not certain, I think your testimony is a little exaggerated there. You know, ask your question, but then I also want to hear you respond, why do you have so little faith in these wireless providers? Mr. Feld. Well first of all, let me say I cannot help but think fondly and nostalgically of the '85-'86 Celtics, but that is just a product of growing up in Boston. The issue I just wished to raise was there were many other competitors comparable to T-Mobile and Sprint who--both of whom were going through their own internal spectrum issues, T-Mobile buying and clearing AWS, Sprint and the rather horrific 800 megahertz rebanding, that participated. They all got beat. Alltel came out with nothing. They had not choice but essentially to exit the field after they came up empty. Leap came up empty. Metro PCS came up practically empty. All of these players came in because when push came to shove, Verizon and AT&T were able to bring the most resources to bear on the licenses that they wanted to have, and nobody else could hope to outbid them. You know, that is what happened in 700 megahertz, and if T-Mobile had been there, they would have gone the same way as Alltel. Mrs. Blackburn. My time has expired, but I will just mention for the record, I read a Citibank report in preparation for this, and I think that Verizon now has less spectrum per million post-paid subscribers than any of you at the table. And so as we--I think we need to be careful about talking about trying to keep people out or restricting the auctions, and I yield back. Mr. Walden. The gentlelady yields back, and at this time the chair recognizes the gentleman from California, the ranking member of the full committee, Mr. Waxman, for 5 minutes. Mr. Waxman. Thank you very much, Mr. Chairman. As I said in my opening statement, Congress enacted this law, the Public Safety Inspector MACT, with multiple goals in mind. These goals include using auction revenue to fund multiple priorities, such as the creation of a nationwide public safety broadband and network known as FirstNet, as well as ensuring that the wireless marketplace remains competitive after the auction closes. These goals are not mutually exclusive. I would rather just ask the panelists, I can ask you all answer affirmative, but do any of you think that the FCC is not capable of conducting an auction that advances both of these critical goals? Seeing no one responding, then I will accept---- Ms. Ham. They are absolutely capable of doing that. Mr. Waxman. OK, thank you. Now I would like to ask a hypothetical question. It is a simple hypothetical of our panelists. Let's assume that the incentive auction clears enough spectrum for the FCC to make available for sale seven paired spectrum licenses at every market throughout the United States. Should the FCC allow any one bidder to acquire all seven licenses available in a market? Maybe get a yes or no. Mr. Feld? Mr. Feld. No, certainly not. Mr. Waxman. And Mr. Epstein, do you want to answer that? Mr. Epstein. Whatever diplomatic skills I exercised with Ranking Member Eshoo I would like to exercise again, because we are the initial decision makers on that issue. Mr. Waxman. Well I wanted a yes or no, so if you don't feel you can do a yes or no, maybe because we are asking about the FCC I will ask the other panelists. Mr. Kaplan, yes or no? Mr. Kaplan. It is not an issue that NAB has taken a position on, but I don't believe anyone on this panel will answer that question yes, I think that only one bidder should win. I don't think anyone has answered that. Mr. Waxman. OK, Mr. Padden? Mr. Padden. Congress has asked a great deal of this one small proceeding, and that is to convince enough broadcasters to come in and volunteer their spectrum to raise enough money to---- Mr. Waxman. But should the FCC allow, under my hypothetical, any one bidder to acquire all seven licenses, if that is what we have available, in the market? Mr. Padden. We believe the priority has to be to maximize the revenue in this market--in this auction to achieve the public interest goals Congress has set, including funding FirstNet. Mr. Waxman. So you think that FCC should allow it if it backs---- Mr. Padden. We would defer to the market forces of the auction to determine the outcome. Mr. Waxman. Ms. Ham? Ms. Ham. No, I don't think any one bidder should acquire all of it, and I think you can have a healthy competition and maximize the revenue. Mr. Waxman. Ms. Marsh? Ms. Marsh. I think that it is highly unlikely, if you look at prior auctions, that that would ever happen. We have always had a diversity of winners, even when auctions were open and free to all participants, and as a backstop to that, the FCC would always retain its general authority over spectrum aggregation. AT&T has never suggested that general authority would not continue to exist. Mr. Waxman. OK, thank you. Let me ask this to Mr. Feld and Ms. Ham. When Congress first granted the FCC the authority to conduct spectrum auctions in 1993, the law included specific instructions about what the Commission must consider to protect the public interest. Under Section 309(j) of the Communications Act, the FCC is required to promote ``economic opportunity and competition'' and ensure that ``new and innovative technologies are readily accessible to the American people by avoiding excessive concentration of licenses and by disseminating licenses among a wide variety of applicants.'' Furthermore, statute prohibits the FCC to base a public interest finding solely or predominantly on the expectation of revenues from an auction. Mr. Feld, Ms. Ham, do you think these provisions are equally valid today? Mr. Feld. Absolutely. In fact, the Spectrum Act of 2012 explicitly states in Section 6043(i) that nothing in this subsection shall be construed to expand or contract the authority of the Commission, except as otherwise expressly provided. Those provisions remain. They were not explicitly addressed. What was addressed was a methodology in which Congress said the rule by which you implement those things is to say you can't--it must be a rule of general applicability, which is what the Commission has before it today, and those remain not only legal, but we would argue under the statutes that you have cited, necessary. Mr. Waxman. Ms. Ham, you were there in the original auction. Ms. Ham. Yes, I was there. No, I think those provisions are very wise and valid, and as I indicated before, it is the reason why T-Mobile exists today and the reason why billions have been invested into this industry and millions of jobs have been created since that law was enacted. So yes, I think it is wise and it is good public policy. Mr. Waxman. I want to conclude by asking Mr. Feld, as you know, the Department of Justice filed a letter with the FCC earlier this year in support of its spectrum aggregation rules. The Department expressed concern that the dominant wireless incumbents may have the incentive to pay foreclosure value to acquire spectrum licenses for the purpose of blocking competition and preventing rivals from improving their competitive position through the acquisition of better spectrum. An article in the Wall Street Journal recently suggested that AT&T's proposal to acquire Leap Wireless is evidence that foreclosure might be a real concern, given that AT&T is willing to spend more than eight times Leap's 2013 earnings to acquire the carrier. Do you think that the DOJ was correct to raise this concern with the FCC? Mr. Feld. I absolutely think the DOJ was correct, particularly with regard to the low band spectrum, because this is all there is. There is no spectrum fracking that we can use to get low band spectrum out of spectrum shale. There are no new spectrum mines that could be open now that the price of low band spectrum has become more valuable. This is our last chance to get low band spectrum into the hands of competitors, and therefore there is every incentive for those companies that could block competitors from getting it to do so. Verizon is advertising its low band spectrum on its LTE network. To borrow Ms. Blackburn's proof, they are advertising that you can get better reception in the woods on a Verizon system using 700 megahertz low band spectrum. That is really valuable stuff that they expect even the consumers who don't know what a megahertz is to understand. It is incredibly valuable and we need to make sure that competitors have some. Ms. Marsh. Can I respond on the foreclosure point? Mr. Waxman. It is up to the chairman, but I certainly would want you to be able to. Mr. Walden. Well, the gentleman's time has expired, but if you could make it very, very brief. Ms. Marsh. Yes, the foreclosure point is fully addressed by the FCC's build requirements. The FCC today and in the prior auction and all transactions have very stringent build requirements that requirement any licensee that acquires spectrum to build it in very specific timeframes, or face significant consequences. We think that that completely eliminates any potential threat of buying spectrum simply to foreclose competitors. Mr. Waxman. Thank you. Thank you very much, Mr. Chairman. Mr. Walden. Thank you very much. The gentleman's time has expired, and yields it back. At this time, the chair recognizes himself for 5 minutes. Again, I want to thank all the witnesses for your testimony today. I think it is another outstanding panel that we have here today. Let me just start, Mr. Kaplan, with some of your testimony that you gave today, and if I can just get a little more comment on this. I just read a little bit from page 7 you were talking about in February of this year that the FCC's staff presented what the FCC staff believed to be the seven key components of the voluntary broadcast incentive auction, and you list those seven. But then you say this: this list is remarkable for the fact that almost a year and a half after passage of the Spectrum Act, the affected industries still have no clear idea how and when the FCC plans to address these key components. Would you care to comment on that? Mr. Kaplan. Sure, thank you. One concern we have is transparency, and not just transparency for transparency's sake, but transparency and engagement, and that means, on the list of seven that is there, aside from the first one which actually was mandated by Congress, the options that were available to the FCC for participation by broadcasters, but is bringing people together. And actually, we had a very nice conversation before this hearing, so thank you for bringing this panel together, because I think we have already accomplished some things before the hearing--to work together prior to things coming out to figure out how we, I guess to quote Jerry Maguire, how we can help you. So in other words, we would love to be of assistance, as I know T-Mobile and AT&T, Harold, Preston, to the Commission, but understanding where they are in the process is enormously important, because otherwise, we are shooting in the dark. So all of our comments about transparency are about transparency and engagement. And to Ms. Eshoo's point before about the auction in 2014, to get that done, we all need to be engaged. We are ready to do it. We want to do it expeditiously, but not knowing where things stand and then finding out, let's say, the night before a hearing where we might be and then trying to figure out things really quickly is not necessarily a recipe for success. So we are ready to do it, but I think transparency and engagement are central. Mr. Walden. Thank you very much. Mr. Epstein, I know this is an issue that is very important to both Chairman Emeritus Dingell and to me because of our districts, where we are located. Mr. Dingell's being in Michigan and mine being in northwest Ohio, and of course, with Ontario being our next-door neighbor. Has there been further progress on coordination of efforts on setting a timeline in getting things worked out on international agreements with the Canadians, especially when we are looking at the whole issue of spectrum and we are looking at trying to get that completed prior to or after? What is it looking like right now at the FCC? Mr. Epstein. Yes, Mr. Chairman, if you would indulge me for a moment, I would like to respond to Mr. Kaplan. I can either do that now or---- Mr. Walden. Go ahead. Mr. Epstein. OK. Just very briefly, I think I agree with the need for transparency and engagement. I do slightly disagree with what the Commission has done over the last year. There have been, you know, four workshops, there have been public notices that have come out, there are 460 comments that have been filed. I have actually--of all of the panel members that are here, I think the NAB has been in more than 15 times to have meetings with the Commission's staff. We welcome their engagement and we welcome the engagement of everybody on this panel. If we can do better, we will do better with respect to that. But I think that is a crucial and important part of the incentive auction process. With respect to the question about border issues, we agree that it is important to allow us to do as much as we can to reach agreements with Canada and Mexico to allow us to repack, to allow us to reclaim more spectrum in the border areas. We intend, of course, to follow the statutory requirement to coordinate with Canada and Mexico. We are committed to advancing the process. We are working very closely, both with the International Bureau and the Department of State. Staff level meetings have been held for at least the last 4 or 5 months on technical matters. Chairwoman Clyburn places this at the highest priority level. She is traveling to Canada this Thursday and has asked me to accompany her to engage in further high level discussions in order to attempt to reach agreements. What we intend to do by the time of the auction is to advance the process sufficiently to provide as much certainty as possible. It is not a different or all that unusual problem with respect to spectrum discussions and negotiations. In almost all of the auctions, like the 700 megahertz auction, the analog to digital transition, we have had similar issues and have had similar successes. Mr. Walden. Thank you very much, and my time has expired, and the chair at this time recognizes the gentleman from Michigan, Chairman Emeritus Mr. Dingell, for 5 minutes. Mr. Dingell. Mr. Chairman, I thank you for your kindness. As you know, I am strongly interested in seeing that the incentive auctions authorized by the Middle Class Tax Relief and Job Creation Act of 2012 proceeds in a fair and transparent manner. With respect to the reverse auction, broadcasters should be treated fairly, and I will do my level best to ensure that the Commission takes no action that would deprive constituents in border areas of free over-the-air television. Concerning the forward auction, the Commission should implement simple rules in a transparent manner that allows the greatest number of parties to bid on reclaimed broadcaster frequencies. As the representative of the Act's implementer, I will be most interested to hear Mr. Epstein's response. Consequently, my questions this morning will be directed at him. They will require only a yes or no. Mr. Epstein, I want to begin with the reverse auction. Section 6403(b)(1) of the Act specifies that the Commission may, subject to international coordination along the border with Mexico and Canada, reassign and reallocate broadcast frequencies. Is that correct? Mr. Epstein. Yes. Mr. Dingell. Mr. Epstein, in the Commission's July 2, 2013, response to my letter of inquiry about the reverse auction, you made the following statement. The language used in Section 6403(b)(1) of the Act is, and I quote, ``identical to that used by the Commission in describing its handling of the earlier DTV transition, in which the Commission adopted our proposed allotments for these stations, subject to our continuing negotiations with Canada, notwithstanding the broadcasters' request to the contrary.'' One could reasonably assume that based on that statement, that the Commission may assign and reallocate broadcast frequencies pursuant to the Act while negotiations with Canada and Mexico are still ongoing. Is that correct? Mr. Epstein. Yes. Mr. Dingell. Is that going to happen? Mr. Epstein. As I stated in response to the prior question that we are doing everything we can to provide as much certainty as we can---- Mr. Dingell. My people are not feeling much certainty on this matter, and I would remind you that this is subject to very intense discussions, or should be, between the United States, Mexico, and Canada in order to ensure that the services to our people up there do not go dark. Is it correct that the Commission has not yet finalized its order to implement Section 6403 of the Act, yes or no? Mr. Epstein. Yes. Mr. Dingell. In that case, Mr. Epstein, I would urge that the Commission in its final order not to reassign or reallocate the broadcast frequencies until it has concluded negotiations with Mexico and Canada. As I noted earlier, my constituents live in a border region and stand to see television stations go dark if the Commission doesn't get this right. For their sake, I prefer you measure twice and cut once when it comes to broadcast repackaging. Now Mr. Epstein, I would like to turn my attention to the forward auction. I note that the Commission has had a proceeding pending on its spectrum screen since September, 2012. Does the Commission intend to complete this proceeding before releasing new rules for the forward auction authorized by Section 6403(c) of the Act? Yes or no? Mr. Epstein. Congressman, that is above my pay grade. The schedule for the Commission acting on this order is something that the Commission will take up. What I do know is that the Commission has expressed a desire to provide clarity before the incentive auction goes forward. Mr. Dingell. You are comforting me but only slightly. Now, Mr. Epstein, Section 6403(c) contains an interesting subparagraph which provides that the Commission may not grant licenses through the forward auction, reassign or reallocate broadcast frequencies, or will revoke spectrum usage rights unless it proceeds--unless the proceeds of the former--forward auction are greater than the following three factors combined: those factors are the total amount of compensation that the Commission must pay successful bidders in the reverse auction; the costs of conducting a forward auction; and the estimated costs for the Commission to pay for broadcaster reallocations. In addition, it is in the public interest that the Commission ensure that the auction raises a significant amount of money in order to help fund the build-out of FirstNet. Together, these constitute significant pressure on the Commission to maximize the auction's revenue, do they not? Yes or no? Mr. Epstein. Yes, it does. Yes. Mr. Dingell. OK. Now Mr. Epstein, to that effect, will the Commission adopt transparent and simple rules to encourage participation by the broadest group of wireless providers in the forward auction? Yes or no? Mr. Epstein. Yes. Mr. Dingell. Now I would like to ask unanimous consent, Mr. Chairman, that the July 16 letter sent by Mrs. Engel, Butterfield, Green, Braley, Matheson, Barrow, Tonko and I to the Commission about the forward auction as well as any response that the Commission may tend or may care to send to be included in the record. [The information appears at the conclusion of the hearing.] Mr. Dingell. The entire incentive auction must be subject to rigorous and ongoing oversight in order to assure the transparency and that it achieves to Congress' intent as set forth in the Act. I thank you for your courtesy, Mr. Chairman. Thank you, Mr. Epstein. Mr. Walden. Mr. Chairman, without objection, your letter will be, and its response, entered into our record. Mr. Dingell. Thank you, sir. Mr. Walden. Yes, sir. Now turn to gentleman from Illinois, Mr. Shimkus, for 5 minutes. Mr. Shimkus. Thank you, Mr. Chairman. I think my questions are going to follow right along with Mr. Dingell's point, and I will go to Mr. Epstein. You have studied the Spectrum Act to a sufficient degree that you and I can walk through--this is a question--through the auction revenues proceeds from the forward auction that are contemplated by this Act, so I want to go through the sections, and you are prepared to maybe answer? Section 6413(b)(3) we have $7 billion for FirstNet. 6413(b)(2), $135 million for State and local implementation funds. 6413(b)(4), $100 million for public safety research. 6413(b)(5), $20.4 billion for deficit reduction. We are good on the numbers so far? Mr. Epstein. Congressman, I don't have the statute in front of me, but it sounds correct, subject to my confirmation. Mr. Shimkus. OK. So we have got $115 million for Next Gen, $200 million for wireless, $1.75 billion for TV broadcasters' relocation. That comes to about $28.7 billion is what is projected under the Act, I am being told. Will the auction rules that you are devising enable the production of the proceeds in this amount? Mr. Epstein. I can't predict, OK, how much money we will raise in the auction. It is a market-based auction. What our job is is to make the auction attractive and simple and get maximum broadcaster participation. Mr. Shimkus. OK, let me go. If in addition to this proposed hopefully $28.7 billion, do we also--might we also need additional proceeds to pay broadcasters who participate in the incentive auction? Mr. Epstein. The total amount of money that we will need will include the amount, of course, that we have to pay broadcasters who---- Mr. Shimkus. So it might be more than $28.7? Mr. Epstein. Again, I don't have the exact numbers. Mr. Shimkus. So here is the crux of the question, and it is line with the letter that the Democrats sent. Are you designing an auction that will produce only ``minimum proceeds'' described in the Spectrum Act, or are you trying to design an auction that reaches the goals of the Spectrum Act that we just kind of went over? Mr. Epstein. I think I--in my testimony, I talked about the four goals that were put before us by Congress, which include to maximize the amount of spectrum which is repurposed. The second goals are the fiscal goals, which are equally important, and they--I talked about the statutory requirements that are to pay the broadcasters, to pay the reimbursement, to pay our---- Mr. Shimkus. OK, so let me follow up, because again, there is another one I want to get to. If we impose restrictions to AT&T and Verizon, can we get these dollars? Mr. Epstein. It is an issue which is before the Commission. It is an issue you heard today being debated by two of the major carriers. They take different positions on them. One carrier here says that you will maximize auctions by limiting participation. Another carrier takes the exact opposite view. So these are the difficult issues that will be before the Commission to determine which of these is correct and in the public interest---- Mr. Shimkus. The public interest, the public policy designed by the legislation which was passed---- Mr. Epstein. Correct. Mr. Shimkus [continuing]. Which was to ensure that we had the funds available to roll out our first responder communications system, and all these other applications. So we have to get it right, and that is kind of why we are focusing on this. We know there is a struggle, but this is our best spectrum. It is not a small proceeding. This is a big deal. It is our best spectrum, and really, our biggest bite at the apple, and hence the oversight hearing on this. Let me just finish up with a question, Mr. Feld. You almost had me when you talked about fracking, because I was there with you until--but you do propose a position which I find is more challenging for me that when you pull away some spectrum for other use, the remaining spectrum is going to be more valuable. I would like Ms. Ham and Ms. Marsh to respond whether they agree with that, and why or why not? Ms. Ham. Thank you. Well one thing I wanted to clarify to make sure you understand, you guys were wise in putting other spectrum bands into the Spectrum Act so it is not just the broadcast spectrum that is going to raise money for public safety. There are at least 65 megahertz, and if you want to put some of that additional DOD federal spectrum in there, you know, that can raise money---- Mr. Shimkus. That is a debate for another time. Ms. Ham [continuing]. As well. So there are other sources, and I just want to make sure that you understand that. And then again, your other question--excuse me---- Mr. Shimkus. Is when you in essence apportion some of the spectrum and you have a limited amount, does that make that more valuable in the overall proceeds might be more? Ms. Ham. Well, you know, there are a lot of different factors that go into, you know, auctions, OK, and one of the biggest factors is the amount of spectrum that is in this auction. T-Mobile is calling for a band plan that has 20 more megahertz in the auction than AT&T, OK, as part of the band plan. That is going to have a huge impact on revenue, so we want to see the maximum amount of spectrum in the auction and we want to see the maximum amount of participation. We think that is going to raise the most revenue. Ms. Marsh. And just to correct that, so there are different variations of band plans on the record, but we all agree we need to maximize spectrum available for auction. We believe, though, we have to get the engineering right, and we cannot put forward a band plan that has engineering challenges or introduces interference. On your specific question, which I take it to be about unlicensed allocations, AT&T supports unlicensed allocations if they can exist in guard bands, including the duplex gap, and not create interference. The biggest challenge would be if we introduced unlicensed services, and they interference with adjacent licensed allocations, we will suppress the value of the licensed allocations and we will suppress the revenue raised at auction. Ms. Ham. Yes, and I would just say on the unlicensed piece, I think we agree with that. We would like--you know, we want to make sure that whatever guard bands are set up for unlicensed-- T-Mobile likes unlicensed. We use unlicensed. We have Wi-Fi calling in all our phones, but you know, we have to have reasonable interference---- Mr. Shimkus. My time is way expired. Thank you, Mr. Chairman. Mr. Walden. Those were good answers, and you are right, we don't want this interference thing. We have had hearings on things like light-squared GPS and things of that nature, and that is--we will go now to Mr. Doyle from Pennsylvania for questions. Mr. Doyle. Thank you, Mr. Chairman. Mr. Epstein, maybe just to follow up on what my friend, Mr. Shimkus, and Ms. Ham said. Much has been made about the role the auction is going to play in funding FirstNet, and yet, part of the Act that created the incentive auction process also provided for multiple funding opportunities in the form of partial proceeds from other auctions going forward for the funding of FirstNet, which Ms. Ham just referred to. Just for the record, what other auctions will FirstNet draw its funding from, and how does the FCC view its obligation to raise these funds? Mr. Epstein. Let me apologize. I am innately and completely focused on the incentive auction. Mr. Doyle. Good. Mr. Epstein. The Wireless Bureau is running a number of other auctions, you are exactly right. There are a series of auctions which will also contribute to the FirstNet and other emergency funding obligations that are there, and I can supply you with a list of those auctions which are teed up. Mr. Doyle. Thank you. Ms. Ham, let me ask you also. You know, members of the committee and stakeholders that we have heard from today have expressed concerns that spectrum aggregation limits will result in lower auction revenue. However, when I read your testimony, T-Mobile and other carriers are arguing quite the opposite. So tell us, how can an auction with limits on bidder eligibility result in higher revenues? Ms. Ham. Well I think through greater participation. I think, you know, again as I said earlier, we don't really even know how much spectrum there is going to be in this auction, and if there isn't a lot of spectrum, I think it is easier for AT&T and Verizon that have an 80 percent concentration in this spectrum today to be able to divide and conquer it. I think all the bidders who sign on to the letter that was put into the record I think would attest to the fact that having some reasonable limits--and again, we are not calling for the exclusion of AT&T and Verizon. Bear in mind, they already have 80 percent of the lower band spectrum. We are talking about reasonable aggregation limits to give everybody else an opportunity, a foothold on this very important spectrum. Mr. Doyle. So you are saying if these reasonable limits you talk about are in place, that this will encourage more participation from smaller companies? Ms. Ham. Yes, absolutely. Mr. Doyle. I mean, how does it drive up higher---- Ms. Ham. Absolutely, and I draw from my experience, you know, running these spectrum auctions in the early PCS auctions. We exactly did that. We had limits on the amount. You had a situation there where you had two cellular duopolies who had 25 megahertz of spectrum, and the Commission put in place limits on the ability for those duopolies to acquire PCS spectrum. The point of putting PCS spectrum out in the mid- '90s, remember those huge phones you used to have and the lack of innovation and the high prices we were paying? You know, we don't want to go back there, OK? Putting new spectrum into the market is the most important auction that the Commission is going to run that I can think of, OK, at least a decade. It is very important to competition, so you need to get--you need to take into consideration the competitive structure of the market and the importance of this spectrum to competition going forward. Mr. Doyle. Mr. Epstein, I want to follow up on something that my friend Ms. Eshoo talked about, too. I am also very concerned that the band plans that are being offered by some stakeholders do not provide adequate spectrum for unlicensed usage. What do comments in the records at the FCC reflect on unlicensed spectrum, and how does the FCC view those comments in light of its responsibility to encourage innovation and flexible uses of spectrum? Mr. Epstein. Congressman Doyle, our original notice recognized the importance of both licensed and unlicensed spectrum. It is one of the four policy goals I talked about in my opening remarks. The Act permits use of unlicensed spectrum in the guard bands without auction, and what the notice does and what the Commission is committed to doing is a balanced approach. We will, of course, comply with the statutory requirement that the guard bands are not larger than technically reasonable, and the Commission will make the ultimate determination recognizing the importance of unlicensed spectrum as part of the overall plan. Mr. Doyle. I would urge the FCC to issue a public notice and hold a workshop to address those issues. Finally, Mr. Epstein, I--and again, just for the record, because there is some concern about transparency and whether there is engagement in transparency going on at FCC. I did hear you mention that there were, what, 15 ex parte meetings with NAB. Just for the record, can you tell us how many times you have--that the Commission has met with witnesses here today on the panel? Mr. Epstein. I can, but I do want to preface by saying I consider this extremely positive things that the Commission has done. We get a lot out of these meetings. We hope they will continue, and we encourage and welcome them. What our records show is that we have had 15 meetings with the NAB. We have had 11 meetings with EOBC, the Padden organization, Public Knowledge, 3, AT&T, 8, and T-Mobile, 16. Mr. Doyle. Thank you very much. Mr. Chairman, thank you. I will yield back. Mr. Walden. Gentleman yields back and we turn now to the gentleman from Louisiana, Mr. Scalise, for 5 minutes. Mr. Scalise. Thank you, Mr. Chairman. Appreciate you holding this hearing. I thank all the panelists. I know you are all working hard to ultimately get to the point we want to get to, and that is to have a successful spectrum auction. I do want to take a moment to commend again the chairman, which I don't do a whole lot, but I usually just make fun of him. But you know, the fact that his legislation moved forward after years and years and years of people talking about this and trying to do it, he ultimately made it happen and so I do think it is important to note that. You know, when you see how hard it is to get things done in Congress, you know, the fact that he got us to this point is important, and that is why I think it is so important that we make sure now that it is done right. You know, when you look at the two purposes that were brought forward when the chairman brought the legislation that was ultimately included in the final Act, it was to, number one, make sure that we had the $7 billion to go and build out a national public safety network, something that hadn't been done since September 11, and been promised by a lot of people, but ultimately finally is now at the forefront of being ready to happen. But the other part of that was to also generate additional revenue to reduce the federal deficit, and that is an important point that can't be lost when we are talking about how to set up the rules, and the rules of any game are very important because ultimately, they can have a major impact in how the game is going to be played. And so Mr. Epstein, I want to ask you, we have had a lot of different testimony. There have been a lot of people for months and months trying to make sure that the rules are set up in a way that is fair, and in some cases, they want to make sure it is fair to them. I understand that is their job. But your role is to make sure it is not only fair for the people that will be participating, but it is also fair for the American taxpayer, because the American taxpayer has a big role in this. Because if it is not set up properly and there are limitations to entry that don't allow for the amount of bidding that ultimately yields the greatest amount of revenue, then that is less money that goes to reducing the national deficit. And that is something that we have got to watch out for, not only as legislators, but you as a regulator who is drafting these rules. If there are limitations put in place to entry that ultimately would reduce that competition, then that can reduce the revenue, not only to build out an interoperable network for our first responders, but also to pay down the deficit. So when you are looking at that, are you thinking about that in addition to all the interest you are getting from the people that will hopefully be coming to bid, but also are you thinking about the fact that you need to make sure that yielding the most revenue was a big component of this Act passing so that we can reduce the deficit? Mr. Epstein. Yes, Congressman, we are looking at that as a major goal. We are also looking at the overall statute, which has a series of goals and I think as many people have stated here, many Congress people have stated here today, it is a balancing act but the goal that you point out, of course, is an extremely important part of that balance that must be struck. Mr. Scalise. Thank you, and I would encourage you to continue to keep that mind in view as well. I want to ask both Ms. Ham and Ms. Marsh, because you have competing views on how that set of rules is established. I guess, Ms. Ham, I have trouble when you say that limitations on auction access will increase competition. I guess I am not quite understanding that, so I want to get your take, and then also get Ms. Marsh's comment on that as well. Ms. Ham. Sure. Thank you for that question. I think the broad participation--in the auctions that I have had experience with where you had broad participation, so you have a lot of bidders bidding on a lot of markets, those are the healthy auctions that are going to raise revenue, OK? Plain and simple. I think T-Mobile, together with large regional carriers that submitted the letter today all are calling for limits, OK, because they believe that it will make it more likely that they will participate than if you don't have those limits. So reasonable limits--and again, I think T-Mobile is not suggesting excluding AT&T and Verizon, OK, understanding they have 80 percent of the low band spectrum today, OK, we are not saying exclude them, we are saying give other people a shot at this very important spectrum, OK---- Mr. Scalise. So if I could get Ms. Marsh's---- Ms. Ham. And we think getting strong competition in the auction is the way to raise the revenues. Mr. Scalise. Thanks. Ms. Marsh? Ms. Marsh. Yes. I think to understand what is going to happen at this auction, we don't need to go back to the PCS auction. We should look at what happened in the last major auction, the 700 megahertz auction. There, there were 214 qualified bidders, and of those--and it was an open participation auction. No one was limited or excluded in any way. One hundred and one bidders won licenses at that auction and even though it was a difficult economic climate at the time, revenues exceeded congressional expectations by over $10 billion. An open auction can succeed and produce a diversity of winners. Now Mr. Feld suggested a lot of companies were shut out. Let me point to a couple of companies who signed the letter that Ms. Ham just referred to that won significant spectrum at that auction. DISH won 168 licenses, including spectrum covering most of the United States. King Street Wireless, who is partnered with U.S. Cellular, deploy LTE services in 700 megahertz, was the fourth largest winner in that auction a megahertz POPS basis. C Spire, who is also deploying LTE services in its territory, was the tenth largest winner. An open auction with full participation can result in a diversity of bidders, and it will maximize revenues consistent with congressional intent. If I have a moment, I would also like to respond to some of the comments made about low band spectrum. There has been a lot of discussion about the importance of this auction because it is low band spectrum. In a broadband world it is about capacity, and capacity is driven by two things: the width of the band you can put together, regardless of where it sits, it is about how wide the channels are and how dense you build the network. And that type of environment, it is not about low band or high band spectrum. It is about putting together wide band spectrum and building very dense networks, and any advantage that may have been perceived from the low band spectrum in a voice world is very much negated in a broadband world, where it is really about capacity and not coverage. Mr. Scalise. Well thanks. I appreciate your testimony and look forward to a successful spectrum auction. I do want to mention that the broadcasters ought to be treated fairly, because they are an active participant in this--sometimes may be inactive--but they ought to be treated fairly and the impact it will have on them. I know FCC is looking at that as well. And with that, Mr. Chairman, I yield back the balance of my time. Mr. Walden. Gentleman yields back, and I would like to ask unanimous consent to enter into the record a letter from the Telecommunications Industry Association, the leading trade association with global manufacturers, vendors, and suppliers of information communications technology, supporting broad auction participation and maximizing licensed spectrum. Without objection, that will be entered into the record. [The information appears at the conclusion of the hearing.] Mr. Walden. I think that concludes our hearing for today. We really appreciate your testimony, your counsel, the work that you are doing. Obviously there are some issues that still need to be resolved. We took note of that, but we commend you as you move forward to work this out so we have a successful auction, so we continue to be the generator of innovation and new technologies, and generate some revenue to pay for first responders and lower our deficit. Ms. Ham. Thank you. Ms. Eshoo. Mr. Chairman, may I ask---- Mr. Walden. Yes. Ms. Eshoo. Just I would like to thank you for the excellence of this hearing, and bringing together the witnesses that we have here today. Very important. You have all been instructive, and bravo, Mr. Chairman. So this is really enlightening for the subcommittee, and I am very pleased that there are two women. Ms. Ham. Go girl. Ms. Eshoo. Even though they don't agree with each other, two women in very high positions in very important American companies, so thank you again, Mr. Chairman. Mr. Walden. It is a team effort, as you know, organizing our panel, so we appreciate you and your staff's work as well. And with that, we will stand adjourned. [Whereupon, at 12:25 p.m., the subcommittee was adjourned.] [Material submitted for inclusion in the record follows:] Prepared statement of Hon. Fred Upton It has been nearly a year and a half since the Middle Class Tax Relief and Job Creation Act of 2012 was signed into law-- important legislation that included a provision granting the FCC the authority to conduct a broadcast television spectrum incentive auction. This unique auction not only fulfills long standing recommendations to create a nationwide public safety network, but it also helps to meet the soaring demand for commercial mobile broadband services. This auction has the potential to create jobs, spur innovation and breakthrough technologies, and make a substantial down payment toward the national debt. However, in order for the auction to succeed, the FCC must resolve several concerns that both stakeholders and my colleagues here in Congress have regarding the implementation of the law. We continue to exercise our oversight role in the effort to keep the auction on track as intended. As the FCC works to implement this law, it must ensure coordination of television stations along the borders with Mexico and Canada. My home state of Michigan is particularly affected by this which is why earlier this year I was joined by my friend, Chairman Emeritus Dingell, and the entire Michigan Congressional delegation, in a letter to the FCC expressing our concerns. If we fail to get border coordination right, the consequences will be less spectrum cleared for auction and less money to pay for the nationwide public safety network and the reduction of our national debt. It is critical that we get the coordination done, and done before we ask broadcasters to take a leap of faith in the incentive auction. In addition to the important border issues that must be resolved, robust and unfettered competition among bidders is a critical element needed for a successful auction. The FCC must not pick winners and losers by excluding certain parties from the auction or constraining parties' ability to bid. Doing so would not only reduce revenues but also violate the statute. We only have one shot to make this auction successful. Incentive auctions are capable of driving incredible technological and economic benefits. Let's make sure we do it right. [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] [all]