[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
_______
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
RALPH M. HALL, Texas HENRY A. WAXMAN, California
JOE BARTON, Texas Ranking Member
Chairman Emeritus JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois FRANK PALLONE, Jr., New Jersey
JOSEPH R. PITTS, Pennsylvania BOBBY L. RUSH, Illinois
GREG WALDEN, Oregon ANNA G. ESHOO, California
LEE TERRY, Nebraska ELIOT L. ENGEL, New York
MIKE ROGERS, Michigan GENE GREEN, Texas
TIM MURPHY, Pennsylvania DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee MICHAEL F. DOYLE, Pennsylvania
Vice Chairman JANICE D. SCHAKOWSKY, Illinois
PHIL GINGREY, Georgia JIM MATHESON, Utah
STEVE SCALISE, Louisiana G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio JOHN BARROW, Georgia
CATHY McMORRIS RODGERS, Washington DORIS O. MATSUI, California
GREGG HARPER, Mississippi DONNA M. CHRISTENSEN, Virgin
LEONARD LANCE, New Jersey Islands
BILL CASSIDY, Louisiana KATHY CASTOR, Florida
BRETT GUTHRIE, Kentucky JOHN P. SARBANES, Maryland
PETE OLSON, Texas JERRY McNERNEY, California
DAVID B. McKINLEY, West Virginia BRUCE L. BRALEY, Iowa
CORY GARDNER, Colorado PETER WELCH, Vermont
MIKE POMPEO, Kansas BEN RAY LUJAN, New Mexico
ADAM KINZINGER, Illinois PAUL TONKO, New York
H. MORGAN GRIFFITH, Virginia
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
Subcommittee on Communications and Technology
GREG WALDEN, Oregon
Chairman
ROBERT E. LATTA, Ohio ANNA G. ESHOO, California
Vice Chairman Ranking Member
JOHN SHIMKUS, Illinois MICHAEL F. DOYLE, Pennsylvania
LEE TERRY, Nebraska DORIS O. MATSUI, California
MIKE ROGERS, Michigan BRUCE L. BRALEY, Iowa
MARSHA BLACKBURN, Tennessee PETER WELCH, Vermont
STEVE SCALISE, Louisiana BEN RAY LUJAN, New Mexico
LEONARD LANCE, New Jersey JOHN D. DINGELL, Michigan
BRETT GUTHRIE, Kentucky FRANK PALLONE, Jr., New Jersey
CORY GARDNER, Colorado BOBBY L. RUSH, Illinois
MIKE POMPEO, Kansas DIANA DeGETTE, Colorado
ADAM KINZINGER, Illinois JIM MATHESON, Utah
BILLY LONG, Missouri HENRY A. WAXMAN, California, ex
RENEE L. ELLMERS, North Carolina officio
JOE BARTON, Texas
FRED UPTON, Michigan, ex officio
C O N T E N T S
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Page
Hon. Greg Walden, a Representative in Congress from the State of
Oregon, opening statement...................................... 1
Prepared statement........................................... 3
Hon. Anna G. Eshoo, a Representative in Congress from the State
of California, opening statement............................... 4
Hon. Marsha Blackburn, a Representative in Congress from the
State of Tennessee, opening statement.......................... 6
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 6
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, prepared statement................................... 110
Witnesses
Gary Epstein, Senior Advisor and Co-Lead, Incentive Auction Task
Force, Federal Communications Commission....................... 8
Prepared statement........................................... 11
Answers to submitted questions............................... 142
Harold Feld, Senior Vice President, Public Knowledge............. 14
Prepared statement........................................... 16
Answers to submitted questions............................... 145
Rick Kaplan, Executive Vice President, Strategic Planning,
National Association of Broadcasters........................... 37
Prepared statement........................................... 39
Answers to submitted questions............................... 150
Preston Padden, Executive Director, Expanding Opportunities for
Broadcasters Coalition......................................... 55
Prepared statement........................................... 57
Answers to submitted questions............................... 162
Kathleen Ham, Vice President, Federal Regulatory Affairs, T-
Mobile......................................................... 66
Prepared statement........................................... 68
Answers to submitted questions............................... 166
Joan Marsh, Vice President, Federal Regulatory, AT&T............. 83
Prepared statement........................................... 85
Submitted Material
Letter of July 19, 2013, from coalition of Fortune 100 companies
to the committee, submitted by Ms. Eshoo....................... 111
Letter of July 22, 2013, from public interest groups to the
committee, submitted by Mr. Waxman............................. 114
Ex parte by the U.S. Department of Justice, submitted by Mr.
Waxman......................................................... 116
Letter of July 16, 2013, from eight committee members to the
Federal Communications Commission, submitted by Mr. Dingell.... 140
Letter of July 22, 2013, from the Telecommunications Industry
Association to the subcommittee, submitted by Mr. Walden....... 142
OVERSIGHT OF INCENTIVE AUCTION IMPLEMENTATION
----------
TUESDAY, JULY 23, 2013
House of Representatives,
Subcommittee on Communications and Technology,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:34 a.m., in
room 2322 of the Rayburn House Office Building, Hon. Greg
Walden (chairman of the subcommittee) presiding.
Members present: Representatives Walden, Latta, Blackburn,
Scalise, Lance, Guthrie, Kinzinger, Long, Ellmers, Eshoo,
Doyle, Braley, Welch, Lujan, Dingell, and Waxman (ex officio).
Staff present: Ray Baum, Senior Policy Advisor/Director of
Coalitions; Sean Bonyun, Communications Director; Matt Bravo,
Professional Staff Member; Megan Capiak, Staff Assistant; Andy
Duberstein, Deputy Press Secretary; Kelsey Guyselman, Counsel,
Telecom; David Redl, Counsel, Telecom; Charlotte Savercool,
Executive Assistant, Legislative Clerk; Shawn Chang, Democratic
Senior Counsel; Patrick Donovan, Democratic FCC Detailee; Roger
Sherman, Democratic Chief Counsel; and Kara Van Stralen,
Democratic Policy Analyst.
OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OREGON
Mr. Walden. I will call to order the Subcommittee on
Communications and Technology, and welcome our witnesses for
our hearing on ``Oversight of the Incentive Auction
Implementation.''
So the subcommittee meets today to continue our oversight
of the FCC's progress in implementing the incentive auction
legislation that Congress passed last year. As you know, a
successful broadcast incentive auction has the potential to
bring significant revenue from the sale of the spectrum to bear
on our Nation's broadband spectrum crunch, unleash innovation
for consumers, create hundreds of thousands of jobs for
Americans, provide funding to begin the process of building out
a nationwide interoperable public safety broadband network, and
make significant contributions to reducing the Nation's
deficit.
But as with most things, the devil is in the details. We
convened all five sitting FCC commissioners last December for a
progress report on the implementation of the law. This was a
first step in making sure that the Commission stays on track
and acts within the confines of the law. In order to ensure
that the FCC continues to follow the law, proper oversight is
necessary.
A successful auction will require the FCC to get two parts
of the equation correctly: the broadcast side and the broadband
side. Now for broadcasters, the intent of the law could not be
more clear. For those that plan to exit the market, the FCC has
an obligation to let the market work. I am sure the Commission
seems to be contemplating its judgment for that of the market
when it comes to placing a value on a broadcast license. For
the incentive auction to be successful, broadcasters that
participate should be assured that they will be compensated
based on the market value of their licenses as determined by
the auction, not based on estimates by the FCC. The auction is
voluntary, and we should askance at FCC policies that would
dissuade participation.
Now for those who remain in the business of broadcasting, I
have been equally clear what I believe is needed, and the
statute is clear what they deserve is certainty. Broadcasters
should be assured they will be able to remain viable following
the auction. That means the Commission must provide the
certainty that broadcasters in the border states will not be
interfered with by our neighbors to the north and south. But
beyond the statutory requirements, it means the FCC should take
into consideration the unique challenges across the country as
they reclaim broadcast spectrum and repack existing channels.
For example, although ineligible to participate in the
auction, low-powered translators play a unique role in states
in the mountain west. The Commission should consider the
ongoing need for translators as they conduct the repacking
analysis.
On the broadband side of the equation, the Commission
should carefully consider how best to promote participation in
the auction in a way that is consistent with the Communications
Act.
Ultimately, a successful auction will be dependent on both
broadcast and broadband interest. The FCC would be wise to
recognize that in an industry as competitive as commercial
wireless, rarely does the industry speak with a single voice.
That is why I am encouraged that a large portion of the
industry and broadcasters seems to be coalescing around a band
plan that promotes competition and maximizes auction proceeds.
So I would like to have seen the FCC focus on these aspects in
their recent public notice on band plans.
Finally, I would like to talk for just a moment about the
auction participation. Just like the broadcasters, potential
broadband licensees should be courted as participants and not
subjected to economic manipulations at the hands of the FCC. As
we have learned time and again in spectrum auctions, well-
meaning FCCs have tried to place conditions on auctions in an
effort to engineer what it deemed a pro-competitive outcome.
Recently, some have suggested the FCC can place restrictions on
auction participation without any adverse effect on auction
proceeds. It would be folly at best for the FCC to think that
it could know better than the true market-based auction the
maximum amount the auction could raise. Carefully crafted
auction that recognizes the value of participation and has the
humility to let the market decide the value of spectrum will
best serve all the goals of the legislation.
So our witnesses today represent the many sides of this
debate. Broadcasters that want to sell and broadcasters that
want to broadcast, two of our Nation's four largest wireless
providers, a representative of the public interest community,
and the Federal Communications Commission. While our witnesses
may not see eye-to-eye on all the issues we will discuss, I
look forward to your testimony--I have read it--and your
counsel as we all work together on this. I know that we share a
desire to see a successful broadcast incentive auction. I thank
you all for being here today.
[The prepared statement of Mr. Walden follows:]
Prepared statement of Hon. Greg Walden
The subcommittee meets today to continue our oversight of
the FCC's progress in implementing the incentive auction
legislation Congress passed last year. A successful broadcast
incentive auction has the potential to bring significant
spectrum to bear on our nation's broadband spectrum crunch,
unleash innovation for consumers, create hundreds of thousands
of jobs for Americans, provide funding to begin the process of
building out a nationwide public safety broadband network, and
make a significant contribution to reducing the deficit. But as
with most things, the devil is in the details.
We convened all five sitting FCC commissioners last
December for a ``progress report'' on the implementation of the
law. This was a first step in making sure that the commission
stays on track and acts within the confines of the law. In
order to ensure that the FCC continues to follow the law,
proper oversight is necessary.
A successful auction will require the FCC to get two parts
of the equation right: the broadcast side and the broadband
side.
For broadcasters, the intent of the law couldn't be more
clear. For those that plan to exit the market, the FCC has an
obligation to let the market work. I am concerned that the
commission seems to be contemplating inserting its judgment for
that of the market when it comes to placing a value on a
broadcast license. For the incentive auction to be successful,
broadcasters that participate should be assured that they will
be compensated based on the market value of their licenses--as
determined by the auction--not based on estimates by the FCC.
The auction is voluntary and we should look askance at FCC
policies that would dissuade participation.
For those that remain in the business of broadcasting, I
have been equally clear what I believe is needed--and the
statute is clear what they deserve--is certainty. Broadcasters
should be assured that they will be able to remain viable
following this auction. That means the commission must provide
the certainty that broadcasters in the border states will not
be interfered with by our neighbors to the north and south. But
beyond the statutory requirements, it means the FCC should take
into consideration the unique challenges across the country as
they reclaim broadcast spectrum and repack existing channels.
For example, although ineligible to participate in the auction,
low-power translators play a unique role in states in the
mountain west. The commission should consider the ongoing need
for translators as they conduct their repacking analysis.
On the broadband side of the equation, the commission
should carefully consider how best to promote participate in
the auction in a way that is consistent with the Communications
Act.
Ultimately, a successful auction will be dependent on both
broadcast and broadband interest. The FCC would be wise to
recognize that in an industry as competitive as commercial
wireless, rarely does the industry speak with a single voice.
That's why I am encouraged that a large portion of the
industry--and broadcasters--seems to be coalescing around a
band plan that promotes competition and maximizes auction
proceeds. I would like to have seen the FCC focus on these
aspects in their recent public notice on band plans.
Finally, I would like to talk for just a moment about
auction participation. Just like the broadcasters, potential
broadband licensees should be courted as participants not
subjected to economic manipulation at the hands of the FCC. As
we have learned time and again in spectrum auctions, well-
meaning FCCs have tried to place conditions on auctions in an
effort to engineer what it deems a ``pro-competitive outcome.''
Recently, some have suggested that the FCC can place
restrictions on auction participation without any adverse
impact on auction proceeds. Let me be clear: it would be folly
at best for the FCC to think that it could know better than a
true market-based auction the maximum amount the auction could
raise. A carefully crafted auction that recognizes the value of
participation and has the humility to let the market decide the
value of spectrum will best serve all of the goals of the
legislation.
Our witnesses today represent the many sides of this
debate. Broadcasters that want to sell and broadcasters that
want to broadcast; two of our nation's four largest wireless
providers; a representative of the public interest community;
and, the Federal Communications Commission. While our witnesses
may not see eye to eye on all of the issues we will discuss, I
look forward to their testimony and counsel and know they share
our desire to see a successful broadcast incentive auction.
# # #
Mr. Walden. I would yield the balance of my time to the
vice chair of the subcommittee, Mr. Latta.
Mr. Latta. Well thank you, Mr. Chairman, and thank you very
much for holding this very important hearing today.
Spectrum has been a priority for this subcommittee over the
past several years, and it is incumbent upon Congress to
exercise oversight over the incentive auction. The Spectrum Act
passed as part of the Middle Class Tax Relief and Job Creation
Act in 2011 was landmark legislation with the authorization of
the broadcast spectrum incentive auction. The success of this
auction, which will be the most complicated the world has ever
seen, is absolutely critical for bringing more spectrum to the
market for mobile broadband as well as for funding our
nationwide public safety broadband network.
There is no question that success hinges on the incentive
auction's design. I look forward to hearing from each of our
distinguished witnesses on the incentive auction implementation
and the benefits or consequences of the certain auction
designs. I look forward to the testimony, and as we continue
this very critical dialogue.
And with that, Mr. Chairman, I yield back the remainder of
my time.
Mr. Walden. Gentleman yields back his time. Chair now
recognizes the gentlelady from California, Ms. Eshoo, the
ranking member, for 5 minutes.
OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Eshoo. Thank you, Mr. Chairman. Good morning to all of
my colleagues and to those that are testifying today.
As former FCC Chairman McDowell wisely stated last year,
the upcoming voluntary incentive auction will ``literally be
the most complex spectrum auction in world history.'' To drive
new investment, create jobs, and spark a new era of wireless
broadband, we need to make sure this auction is done right the
first time. We have to get this right.
We all know the storyline by now. Consumer demand for
wireless broadband continues to skyrocket. More than half of
all Americans now own a smartphone and as the number of
wireless devices increases, so has data consumption. Last year
alone, mobile devices in the U.S. downloaded more than 1.4
trillion megabits of data. That is nearly four times more
demand than in 2010, and 2010 was not all that long ago.
As the FCC structures its auction rules and band plan to
meet this growth, there are two areas that deserve enhanced
attention. First, with a rare opportunity to auction beachfront
spectrum under 1 gigahertz, we must promote a competitive
wireless landscape in which carriers of all sizes, both
regional and national, have an opportunity to bid competitively
for licensed spectrum. Today in the top 10 U.S. markets, the
two largest wireless carriers control 86 percent of all
beachfront spectrum below 1 gigahertz. As the Department of
Justice observed earlier this year, an auction that protects
and promotes a healthy, competitive wireless marketplace
enhances consumer choice and serves the public good. Consistent
with statute, the FCC should heed this advice by developing
rules that promote competition and broad carrier participation.
Second, the FCC should structure a band plan that ensures a
nationwide block of spectrum under 1 gigahertz dedicated for
unlicensed innovation. The economic benefits of such an
expansion are well-documented with recent studies concluding
that the unlicensed wireless sector contributes between $50 and
$100 billion per year to the U.S. economy. That is with a B.
That is not million, that is billion.
Just this month, West Virginia University became the first
university in the country to use TV white spaces to deliver
wireless broadband service across the campus. Following on the
successes of WiFi, Bluetooth, and RFID, the upcoming incentive
auction can provide a unique opportunity to fuel a new
generation of unlicensed technologies, supporting rural
broadband, connected hospitals, smart grid networking, and so
much more.
So I thank all of the witnesses that are here today to
share your perspectives. I look forward to your testimony that
will support our subcommittee's ongoing oversight.
Ms. Eshoo. I don't know--where is the clock? With that, I
would like to yield the balance of my time to my colleague, Mr.
Doyle.
Mr. Doyle. I thank my friend.
This is a critical time for the future of competition in
the wireless marketplace. Large carriers currently hold over 80
percent of the licenses for spectrum below 1 gigahertz. This
spectrum provides the best in-building coverage, something that
is crucial in urban areas, like many parts of my district in
Pittsburgh.
The increasing disparity in carrier spectrum assets which
the Department of Justice and the Commission have both
recognized, presents significant risks such as slowing
innovation, stifling price and service competition. If we are
going to ensure more competitive mobile services marketplace,
the Commission must ensure that all carriers have the
opportunity to acquire high quality spectrum to meet the
skyrocketing demand for mobile broadband services.
In the Spectrum Act we passed last year, we specifically
preserved the Commission's authority to adopt and enforce rules
concerning spectrum aggregation that promote competition.
Holdings of lower band spectrum are already dangerously
concentrated. I hope the FCC uses its authority to prevent
further concentration in this upcoming incentive auction.
With that, I yield back my time and thank my colleague and
friend, Ms. Eshoo.
Ms. Eshoo. Mr. Chairman, may I just submit something for
the record? This is a letter from a broad coalition of Fortune
100 companies, rural wireless carriers, and small businesses
who believe every wireless carrier should have a fair
opportunity to compete in the upcoming auction.
Mr. Walden. Without objection.
[The information appears at the conclusion of the hearing.]
Ms. Eshoo. Thank you.
Mr. Walden. Gentlelady yields back her time. Turn now to
the vice chair of the full committee, Ms. Blackburn, from
Tennessee, for 5 minutes.
OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TENNESSEE
Mrs. Blackburn. Thank you, Mr. Chairman, and I want to
thank each of you for being here. I have to tell you, we all
have questions and we are looking forward to having your
feedback today as we look at what we think is a pretty
important issue, and that is the spectrum auctions. There are
questions that are unanswered regarding both the policy and the
process. We are hoping that we can clear up some of those. We
think the law is clear and if we follow the law, then we are
going to have a successful auction. And if we don't, then I
think that we are pretty much guaranteed to fail.
It is important for us to keep in mind also that going
through the spectrum auction process, this is not a science
fair project, and we want to make certain that we do our due
diligence. This is going to be a complicated process and it
doesn't mean the FCC should exclude participants in order to
show favoritism to certain telecommunication competitors.
Gerrymandering the auctions, particularly the below 1 gigahertz
level, to give regulatory favor to some competitors at the
expense of those who have earned their success puts all of the
work that we have done up to this point at risk. It violates
the law and it also threatens our ability to stand up the
public safety network, to provide revenue for deficit
reduction, and to find a repacking solution.
So we are going to have a lot of questions for you today.
Again, I thank you all for being here, and we look forward to
proceeding in an orderly manner.
And I yield back--I will yield time to Mr. Long, Ms.
Ellmers, whomever is----
Mr. Walden. If either of you seek time? If not----
Mrs. Blackburn. If no one is seeking time, I will yield
back.
Mr. Walden. Yield back. Chair now recognizes former
chairman of the committee, the gentleman from California, Mr.
Waxman, for 5 minutes.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you, Mr. Chairman.
Today we continue our oversight of the FCC's implementation
of the public safety inspector MACT that Congress passed last
year with strong bipartisan support, and I want to thank
Chairman Walden for working with us to assemble an outstanding
panel of witnesses. We are delighted to have you all here.
We will hear divergent views today on how the auction
should be implemented, but equally strong, we will hear
agreement that we have a need to make this groundbreaking
auction a success.
When Congress enacted this landmark legislation, we knew
that implementation would be challenging. The FCC quickly
retained a group of world class experts to help design the
complex spectrum auction, and the FCC staff immediately started
working around the clock to get this right. I want to thank the
dozens of FCC staffers who have worked so hard to address the
challenges posed by this auction.
In my view, the success of the auction will be measured by
how well we meet the goals laid out by the law. Congress
enacted the law with multiple goals in mind: to help relieve
the spectrum crunch, and to meet the exploding demand of
wireless data, to raise revenue, to fund multiple public
priorities, including the creation of the broadband network for
first responders, or FirstNet, to promote competition in the
wireless marketplace, and to spur continued innovation such as
the creation of new super Wi-Fi services. The law we passed
reflects all of these goals. To promote competition, the law
expressly preserves the ability of the FCC to establish limits
on spectrum aggregation where necessary to ensure competition.
To promote innovation, the law called for the establishment of
a nationwide guard bands that can be used for unlicensed use.
Not surprisingly, some parties are now engaged in
revisionist history, suggesting that the FCC has less authority
than the statute provides. Others are trying to erect straw
men, arguing that proponents of a competitive auction want to
exclude AT&T, Inspect, and Verizon from bidding. No party that
I am aware of is urging the FCC to exclude the biggest wireless
companies from participating in the auction. In fact, my own
view is that both companies should be able to compete in the
auction. But it makes no sense to allow the two biggest
companies with an already dominant market position to acquire
all of this high quality beachfront spectrum. The Justice
Department wrote the FCC earlier this year to emphasize how
important it is for competition and consumers that this low
band spectrum not be dominated by the two big carriers. This
expert views from the antitrust division deserve careful
consideration.
Others have challenged the creation of guard bands, but
guard bands are important to enhance the value of the spectrum
being auctioned, and to create spectrum that can be used for
the next generation of Wi-Fi services. The FCC's job will not
be easy, but the goals of the statute are the right ones and
they are all achievable. With carefully designed rules, the FCC
can make new spectrum available to wireless carriers, raise the
revenue needed for FirstNet, and promote competition and
innovation. Our job should be to resist the importuning of
special interests and help the FCC make this groundbreaking
auction an historic success.
I look forward to the testimony of our distinguished
witnesses, and I would like to ask unanimous consent to put two
documents into the record. One is a letter from public interest
groups, Public Knowledge, The New America Foundation, the
National Hispanic Media Coalition, Free Press of the Writers
Guild of America, in support of pro-consumer limitations on
spectrum concentration as part of the auction of the 600
megahertz band by the FCC.
Mr. Walden. Without objection.
[The information appears at the conclusion of the hearing.]
Mr. Waxman. And the second is to enter into the record an
ex parte by the U.S. Department of Justice concluding that the
rules for the 600 megahertz auctions are necessary to ensure
competition in the wireless market.
Mr. Walden. Without objection.
[The information appears at the conclusion of the hearing.]
Mr. Waxman. Thank you, Mr. Chairman. I yield back the
balance of my time.
Mr. Walden. Gentleman yields back the balance of his time.
Now we will turn to our distinguished panel of witnesses who
have agreed to provide us with great testimony and counsel
today. We appreciate you all being here.
We will start with Gary Epstein, who is the Senior Advisor
and Co-Lead of the Incentive Auction Task Force, the Federal
Communications Commission, the man who has the biggest weight
on his shoulder to do it all, and do it all right, make it all
work. Mr. Epstein, thanks for the work you are doing for the
country at the FCC. We look forward to your comments today,
sir.
STATEMENTS OF GARY EPSTEIN, SENIOR ADVISOR AND CO-LEAD,
INCENTIVE AUCTION TASK FORCE, FEDERAL COMMUNICATIONS
COMMISSION; HAROLD FELD, SENIOR VICE PRESIDENT, PUBLIC
KNOWLEDGE; RICK KAPLAN, EXECUTIVE VICE PRESIDENT, STRATEGIC
PLANNING, NATIONAL ASSOCIATION OF BROADCASTERS; PRESTON PADDEN,
EXECUTIVE DIRECTOR, EXPANDING OPPORTUNITIES FOR BROADCASTERS
COALITION; KATHLEEN HAM, VICE PRESIDENT, FEDERAL REGULATORY
AFFAIRS, T-MOBILE; AND JOAN MARSH, VICE PRESIDENT, FEDERAL
REGULATORY, AT&T
STATEMENT OF GARY EPSTEIN
Mr. Epstein. Thank you very much. Good morning, Chairman
Walden and Ranking Member Eshoo, and members of the
subcommittee. My name is Gary Epstein. I am the Senior Advisor
and Chair of the Federal Communications Commission Incentive
Auction Task Force. Thank you for the opportunity to discuss
the Commission's efforts to carry out Congress' statutory
direction in designing and implementing the broadcast
television spectrum incentive auction.
In our effort to design and implement the incentive
auction, the Commission is guided by four primary public
interest objectives. One, relieving the spectrum crunch by
creating a market-based process for repurposing the maximum
amount of UHF spectrum for licensed and unlicensed flexible use
to address the expected growth in mobile data usage, which is
predicted to grow by a factor of nine by 2017. Two, fulfilling
our statutory obligations and congressional objectives that
include reimbursing repack broadcasters, funding FirstNet, and
deficit reduction. Three, providing a unique financial
opportunity for participating broadcasters while preserving our
healthy broadcast services for those who choose not to
contribute their spectrum. And four, promoting the innovation
in a vibrant mobile market.
As we pursue these objectives, we are focused on both the
engineering and economics issues, and are drawing on the
expertise of the world's leading economists, auction design
experts, and engineers, both inside and outside the agency. We
are engaging with all interested parties in an open and
transparent process in which we will learn from the robust
public record we are building, aim for simplicity, and adjust
our proposals as necessary to ensure that the auction succeeds.
With respect to process, it is also important to remember
that we are in the middle of an open proceeding and the
Commission has made no final determinations. The staff's role
in the incentive auction proceeding, under the direction of the
Commission, is to conduct as comprehensive and exhaustive an
examination of the full range of policy options as practicable
in order to best advise the Commission. Ultimately, within the
bounds of the statute, it is the Commission that will determine
the design of the incentive auction.
The Commission has moved swiftly since Congress passed the
Spectrum Act. A guiding principle has been to ``get it done on
time and to get it done right.'' Under Acting Chairwoman
Clyburn, the staff has continued our steady progress toward a
2013 report and order and a 2014 auction.
In the first 6 months after the Act was passed, the
Commission quickly formed a cross-agency task force, retained
auction design experts, adopted a channel sharing order, and
officially launched the proceeding by adopting a comprehensive
and specific notice of proposed rulemaking.
Since adopting the Notice, we have hosted several workshops
and participated in numerous industry conferences, both to
inform the public about the proceeding and solicit input on
distinct incentive auction issues. To date we have had
workshops on channel sharing, reimbursement for relocation
costs, auction design, the band plan, and the Notice itself.
In addition, in the interests of public engagement and an
open, transparent and participatory process, the Commissioners
and staff have participated in over 180 incentive auction-
related events and meetings since the enactment of the Spectrum
Act, including numerous discussions with our colleagues in
Canada and Mexico. Perhaps unsurprisingly, the Task Force has
met with each of my fellow panelists numerous times to discuss
their particular views with respect to the auction.
Since the Notice, we have also released several public
notices on issues we believe warranted further consideration
and opportunity for interested parties to provide additional
input. To date, we have received and considered over 460
comments and reply comments to incentive auction public
notices. Our public notices have solicited input on
interference calculation software, band plan design, and in the
case of a public notice we released just yesterday, the
repacking process. Yesterday's release includes the results of
a preliminary analysis of whether any particular television
station could be assigned or reassigned to particular channels
in the incentive auction repacking process, consistent with
statutory and other requirements. Each public notice we have
issued has proven critical to advancing the proceeding, and we
expect that yesterday's release, which was only the first of
several public notices we expect to issue regarding repacking,
will allow interested parties to better understand some of our
preliminary efforts in developing a repacking methodology and
elicit valuable comments on our proposals.
Finally, we are committed to an open, transparent, and
inclusive process. On several issues it appears there is
emerging some agreement on how to move forward. On other
issues, stakeholders appear to be coming to general agreement
on the surface, but there remain important differences of
opinion in the details. And on some important topics there
remain divergent positions. The key for the Commission is to
continue to solicit and carefully review ideas from the
experts, both outside and within the Commission, to enable the
Commission to make the hard decisions based on the best
available data and ideas. The Incentive Auction Task Force will
make recommendations to the full Commission that we believe
will result in an auction that will serve the public interest
and achieve the objectives and goals Congress laid out in the
Spectrum Act. The ideas we put forth for the Commissioners to
consider will be based on substantial and valuable input from
the public.
Thank you and I look forward to your questions.
[The prepared statement of Mr. Epstein follows:]
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Mr. Walden. Mr. Epstein, thank you, and again, thank you
for what you and your team are doing to try and get this right
and get it done on time. So we appreciate that.
Mr. Epstein. Thank you, Mr. Chairman.
Mr. Walden. We are going to go now to the Senior Vice
President of Public Knowledge, Mr. Harold Feld. We appreciate
your being back before our subcommittee to testify, and we look
forward to your comments.
STATEMENT OF HAROLD FELD
Mr. Feld. Thank you very much, Chairman Walden, Ranking
Member Eshoo. Thank you for inviting me here to testify today.
Two years ago, I testified before this subcommittee that a
properly structured incentive auction could be a rare public
policy trifecta, a win-win-win that provided more licensed
spectrum, more efficient access to unlicensed spectrum in this
extremely useful set of frequencies. In addition to raising
revenue for an interoperable public safety network, now called
FirstNet, the auction of licenses in this band for mobile
broadband could also enhance competition to the benefit of
consumers.
At the same time, while reallocation of a portion of the TV
band from broadcasting to licensed wireless service would mean
the loss of spectrum for white spaces in some areas that raise
the possibility of creating more access in crowded urban
markets. Through the reallocation of the spectrum and
subsequent repacking of the remaining broadcasters, the FCC
could create a national unlicensed band that would encourage
developers to build new devices and offer more innovative
services that take advantage of the unique properties of these
frequencies.
The last 2 years have proved both the importance of
unlicensed access, especially in the TV bands, and the
importance of stimulating competition on the licensed side. In
this time period, we have seen the cable industry recognize the
value of offering unlicensed access as a supplement for their
broadband networks. Ad hoc unlicensed networks proved their
value in the aftermath of Superstorm Sandy. We now talk of
carrier grade Wi-Fi as a critical tool for the wireless
industry. Wireless ISPs are using unlicensed spectrum,
including TV white spaces, to bring affordable broadband to
rural America.
We have also seen the value of regulatory steps to promote
competition. In 2011, the FCC imposed data roaming rules, and
with the Department of Justice, jointly blocked the effort of
AT&T to acquire T-Mobile. In 2012, they pushed Verizon to
divest spectrum to competitors as part of its acquisition of
spectrum co-licenses. As a result, we have seen more investment
in the wireless market in the last year than we had for many
years before. Billions of dollars of new investment float into
the market as both T-Mobile and Sprint attracted new interest.
These revitalized competitors have offered new equipment plans
and service plans, and in response, AT&T and Verizon have
redoubled their efforts to deploy 4G LTE networks as rapidly as
possible and respond with their own new pricing plans. In
short, competition works and needs to be preserved.
All of this highlights the importance of getting rules for
this incentive auction right. The Department of Justice has
identified access to low band spectrum as critical for
competition. This spectrum is highly valued for its propagation
qualities, its ability to travel long distances and penetrate
buildings and trees. Companies looking to invest in unlicensed,
such as Comcast, Google, and Microsoft have likewise identified
the broadcast band as critical for developing the next
generation of unlicensed services.
What does getting it right mean? First, it means we must
stop creating false choices and pushing the FCC to choose
sides. Congress passed a compromised bill that gave the FCC the
authority to use the auction to enhance unlicensed and promote
competition, but within limits. We should collectively embrace
this compromise rather than refighting old battles. The
priorities of this auction must work together, not push against
each other and fly apart.
Second, we need to respect the FCC staff as they work
through this difficult process. We cannot have the transparency
and trust we need if people unhappy with the substantive
choices browbeat them over procedure. We should recognize that
well-structured guard bands will both provide adequate spectrum
for unlicensed use and increase the value of the service as a
whole. This is not about artificially inflating guard bands to
the point where it would undermine the license service; this is
about being mindful to achieve all our goals. Instead of
setting this up as a false choice where every megahertz of
guard band is seen as lost revenue, we should recognize that
well-structured guard bands will serve the interest of licensed
and unlicensed users alike.
Finally, we need to make sure that we have enough
participation in the auction to make it worth holding. The best
way to ensure that enough bidders to show up is what we call a
``No Piggies Rule.'' Don't ban anyone from the auction, but
limit the number of licenses that any one company can win.
Opponents of a No Piggies Rule argue that we need to have AT&T
and Verizon in the auction. That is true, but the beauty of the
No Piggies Rule is it lets AT&T and Verizon participate; it
just makes sure there are enough licenses to make it worthwhile
for competitors to show up as well. An auction with only AT&T
and Verizon will be just as much a failure as an auction that
banned AT&T and Verizon.
To conclude, the key to a successful incentive auction is a
balanced approach. We get there by continuing our current
deliberative process. We can still achieve a public policy
trifecta, a win-win-win for mobile broadband competition and
unlicensed access and build an interoperable public safety net
that we all need. It would be a shame to miss this chance by
fighting old battles instead of working together.
Thank you, and I look forward to your questions.
[The prepared statement of Mr. Feld follows:]
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Mr. Walden. Mr. Feld, thank you for your testimony. We will
now go to Mr. Rick Kaplan, who is the Executive Vice President,
Strategic Planning, at the National Association of
Broadcasters. Mr. Kaplan, welcome back. We look forward to your
testimony as well.
STATEMENT OF RICK KAPLAN
Mr. Kaplan. Good morning, Chairman Walden, Ranking Member
Eshoo, and members of the subcommittee. Thank you for inviting
me on behalf of the National Association of Broadcasters to
testify before you today.
NAB is committed to lending its expertise to the
subcommittee and the FCC to ensure the successful completion of
the world's first ever broadcast incentive auction to the
benefit of America's consumers, the U.S. Treasury, and public
safety. A properly run auction is also critical to the future
of the Nation's broadcast industry.
Now, a casual observer of today's hearing might be led to
believe that the upcoming incentive auction is primarily a
wireless industry issue. He or she will hear about licensed and
unlicensed spectrum, spectrum aggregation limits, and the drive
to maximize the amount of spectrum freed up by paying
handsomely private equity funds and others on the fringes of
broadcasting to relinquish spectrum. The reality, however, is
that the industry on which this auction will have the greatest
impact is the broadcast industry.
To offer some perspective, according to OSTP and the
National Economic Council, the U.S. commercial wireless
industry will soon control more than 660 megahertz of spectrum,
more than any other commercial enterprise, and well more than
its counterparts in nearly every other country. This amount is
more than double the spectrum allocated to the broadcast
industry, and that is before the incentive auction. In fact, a
wildly successful incentive auction will likely contribute less
than 15 percent of new spectrum to the wireless industry's
overall stockpile.
By contrast, this auction will leave an indelible mark on
the broadcast industry. Some 30 percent of the channels on
which broadcasters operate will be gone, and we will have to
reallocate upwards of 50 percent of the stations that remain on
the air. Moreover, potential changes to our coverage areas
could greatly impair the ability of a significant number of the
nearly 60 million Americans who rely exclusively on over-the-
air television to receive the local stations they count on
most.
Our goal at NAB is to help those broadcasters who remain on
the air continue to have the same opportunities to serve the
American people they had prior to the auction: the opportunity
for the station in Boston to offer wall-to-wall coverage of the
terrifying bombings, the opportunity for the Tri-State area
station to help direct local residents to lifesaving services
during Hurricane Sandy, and the opportunity for the station in
Oklahoma to warn its viewers about the path of deadly
tornadoes.
Some have described this auction as a win-win-win, although
with the final victory being awarded to the broadcasters. To be
candid, from what we have seen so far, we will be lucky to
escape with a tie. In any event, to avoid a loss for the
broadcast industry, the FCC must ensure three things. First,
broadcasters who remain on the air should not be harmed by the
voluntary auction. The Spectrum Act dictates that broadcasters
must be able to serve the same coverage area and same viewers
they did the day after the auction as they did the day before.
The FCC should not, for example, move the goalpost by altering
the formula by which they calculate these coverage areas. No
harm also means that the FCC should not force remaining
broadcasters to go out of pocket for reasonable expenses when
they are forced to make way for the wireless industry. The
Commission must treat the TV Broadcaster Relocation Fund as its
relocation budget. If not, broadcasters could face significant
costs associated with moves they never sought and that offer
them no benefits whatsoever.
Second, the Commission must develop a band plan that avoids
interference between broadcasters and wireless operators. The
engineering behind the FCC's variable plan has not yet been
vetted in an open forum, and the time has come to put the
staff's engineering assumptions to the test. As we know from
experience, post-auction interference problems take far longer
to fix than if they had been addressed openly, transparently,
and thoroughly up front. For the same reason it is essential
that the FCC complete international coordination prior to the
auction and repacking, an unfinished product leaves the
Commission with far less revenue and also forces the Commission
into a jagged variable band plan where it has to match
broadcasting wireless services in an unprecedented manner
across the northern third of the Nation.
Third, despite the fact that low power television and TV
translators are not formally protected in the statute, the
Commission must nevertheless do all it can to preserve these
critical services. As last week's letter signed by 57 House
members representing rural and mountainous districts made
clear--and I would like to submit that letter for the record,
if possible----
Mr. Walden. Without objection.
Mr. Kaplan. Translators are indispensable means by which
rural communities, especially out West, receive their free
over-the-air news, weather, and emergency news information.
Also at a time where the Commission and many Members of
Congress have expressed concerns about diversity in media
ownership or programming, low power television provides one
important answer. If the Commission repacks too aggressively,
literally thousands of translators and many more low power
television stations will disappear and never return.
In closing, the NAB continues to vigorously support the
voluntary market-based incentive auction authorized by Congress
and to see it conducted as expeditiously as possible. But we
must also remember that getting it done right is more important
than simply getting it done right now. Our aim is to preserve a
healthy and robust broadcast industry and to continue to serve
our local communities in a way that no other service can
duplicate. Thank you again for the opportunity to testify, and
I look forward to your questions.
[The prepared statement of Mr. Kaplan follows:]
[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:]
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Mr. Walden. Mr. Padden, thank you for your testimony. We
will now move to Kathleen Ham, who is the Vice President,
Federal Regulatory Affairs of T-Mobile. Welcome.
STATEMENT OF KATHLEEN HAM
Ms. Ham. Thank you. Good morning, Chairman Walden, Ranking
Member Eshoo, and members of the subcommittee. My name is
Kathleen O'Brien Ham, and I am the Vice President for Federal
Regulatory at T-Mobile U.S. Thank you for inviting me to
testify today.
T-Mobile is the fourth largest wireless carrier, serving
about 43 million subscribers and employing 38,000 people in the
U.S. Since the government blocked our merger with AT&T 18
months ago, we have been reinvigorating our brand and our
network. Earlier this year, we announced our uncarrier
strategy, setting us apart from our larger competitors. We
dropped traditional price plans in favor of affordable, simple
choice plans. We said there is no need for annual service
contracts anymore. We gave customers the option to bring their
own device or buy one from us, interest free. We launched JUMP,
so customers can upgrade their phones when they want, not when
they are told.
These innovative moves are putting pressure on our larger
competitors who are now copying our offers. That is what
healthy competition achieves. On top of all this, we are
rolling out our 4G LTE at a record-shattering pace.
The upcoming incentive auction is critical to the future of
wireless competition. Spectrum is the air we breathe. Without
it, we cannot compete and we cannot innovate. The FCC should
maximize the amount of spectrum auction for mobile use. More
spectrum is good for competition and good for auction revenues,
plain and simple. We commend the Commission for its ongoing
work to develop auction rules. To ensure the rules promote
competition and consumer choice, the FCC should consider three
critical objectives.
First, encourage broadcaster participation to maximize the
amount of spectrum auctioned. Second, adopt a 600 megahertz
band plan that maximizes auctioning paired spectrum for mobile
use. Finally, and most important, adopt reasonable spectrum
aggregation limits so the dominant carriers do not foreclose
other competitors from this last best opportunity to acquire
low band spectrum.
All carriers agree there needs to be competitive limits on
spectrum. The only dispute is how and when to employ them. T-
Mobile has proposed an overall limit on the amount of low band
spectrum that any carrier can hold, and we have said no carrier
would be shut out of the incentive auction in any market, even
if they otherwise exceed the limit.
Despite what you may be hearing, limits on spectrum
concentration are consistent with Congress' 1993 directive to
promote competition. It is that visionary law that is the basis
of the billions of dollars in investment and the creation of
millions of jobs that wireless competition has channeled into
the U.S. economy for the past 2 decades.
Why do we need reasonable spectrum aggregation limits?
Three reasons. First, all spectrum is not created equal. The
600 megahertz spectrum penetrates buildings, is cheaper to
deploy in both rural and certain urban settings. Today, the two
largest carriers control about 80 percent of the spectrum below
1 gigahertz, half of which they got for free from the
government in the 1980s. All carriers need a mix of both high
and low band spectrum to effectively compete. T-Mobile, even
with its good high band spectrum position today, holds no low
band spectrum. Second, the two dominant carriers have much to
lose from competition. Their market power gives them a
significant incentive, an ability to acquire spectrum to block
competition. By contrast, T-Mobile and other smaller carriers
value spectrum solely based on its use. Without market power,
you don't pay more for spectrum than the use value derived from
it, no matter who your shareholders are. In a letter shared
with the subcommittee yesterday, smaller and rural carriers
joined T-Mobile in calling for low band limits to protect
competition. Finally, up front limits enhance auction revenue.
Without them, smaller bidders may decide to sit out the auction
or curtail their participation.
Without a doubt, this auction will have a critical impact
on the competitive future. The right policy choices will foster
competition and investment. The wrong choices will move us
backward. Thank you for inviting me to testify today, and I am
happy to take any questions.
[The prepared statement of Ms. Ham follows:]
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Mr. Walden. Thank you very much, Ms. O'Brien Ham. We
appreciate your being here.
We now turn to Joan Marsh, who is Vice President, Federal
Regulatory Affairs for AT&T. We welcome you here, Ms. Marsh,
and please go ahead with your testimony.
STATEMENT OF JOAN MARSH
Ms. Marsh. Thank you, sir, and thank you, Chairman Walden
and Ranking Member Eshoo for inviting AT&T to join in this very
important discussion today.
To quote former FCC Chairman Julius Genachowski, ``This is
a big deal.'' The 600 megahertz auction presents the next best
opportunity to reallocate valuable spectrum for wireless
broadband use, and could be the only one like it for years to
come. But this auction is not just about new wireless
allocations; it is also about critical public safety goals.
There is wide agreement that the auction must generate up to $7
billion to fund construction of the first nationwide
interoperable wireless broadband public safety network. Auction
revenues will also support broadcaster relocation, public
safety research, next generation 911 services, and much needed
deficit reduction.
The importance of these goals has been underscored by both
sides of the Aisle in letters to the Commission, urging them to
adopt policies that will enhance the ability of the auction to
meet these critical statutory goals. We agree. But success in
meeting these goals is by no means a guarantee. This is, by
far, the most complex auction proceeding ever undertaken, and
the Commission must persuade two different sets of auction
bidders to participate in two separate but interrelated
auctions.
In the face of this enormous complexity, there are a few
key principles that should guide decision-making at every turn.
You will be happy to hear I agree with two of the principles
Ms. Ham expressed today. I would like to discuss how our one
remaining principle in which there is some disagreement.
The primary principle is straightforward: allow free and
open participation in the auction by all qualified bidders.
This approach is the only one that will maximize auction
revenues and thereby maximize the chances for an auction that
achieve all of Congress' stated goals. If qualified bidders are
excluded or limited in their bidding activity, less spectrum
may be relinquished by broadcasters, the spectrum that is
offered will sell at lower prices, and the chances of a
successful auction will be diminished. Unfortunately, as always
in the case of regulatory proceedings of significant import,
there are some who want the Commission to gain the rules in
favor of certain competitors over others. These proposals vary
in their specifics, but they share a common theme: restricting
AT&T and Verizon from full participation in the auction while
steering spectrum to other bidders, including Sprint and T-
Mobile, neither of which participated in the last major
auction. These proposals are ill-advised, as they are unlawful.
For starters, we believe they are unnecessary. Sprint already
has, by far, the largest spectrum portfolio of any U.S.
wireless provider, vastly exceeding that of both AT&T and
Verizon. Indeed, given this it is by no means certain that
Sprint will choose to participate in the 600 megahertz auction.
Sprint also has at its disposal substantial new capital
resources from its owner, Japanese-based SoftBank to fund any
future spectrum purchases it might choose to make. For its
part, T-Mobile is owned by Deutsche-Telekom, one of the largest
telecommunications companies in the world. It too has recently
acquired substantial amounts of new spectrum, including from
AT&T, Verizon, and the former Metro PCS. In fact, T-Mobile now
runs ads in the marketplace claiming that its network is less
congested and provides greater capacity than does AT&T's.
In short, there is no basis upon which to conclude that
Sprint or T-Mobile have a greater need to win spectrum at this
auction than any other bidder. More importantly, to the extent
these carriers choose to participate, there is no basis to
conclude that they lack the resources to bid competitively and
win, absent auction rules that either make it easier or cheaper
for them to do so. Conversely, restricting or limiting bidder
participation will come at a heavy price. If AT&T or Verizon
are restricted, or relegated to a separate shadow auction with
its own set of rules, spectrum values at auction will be
suppressed and revenues reduced. This result would effectively
ask U.S. taxpayers to subsidize the auction, undermining the
auction's revenue goals, including that of deficit reduction.
Such rules could also impact the calculation that broadcasters
will make in deciding whether to participate or not.
For these reasons, AT&T has urged the Commission to adhere
to its statutory mandate and conduct an open and competitive
auction that awards spectrum to the highest bidder. This
approach is not only consistent with the law, but it would also
offer the best prospect for a successful auction that meets all
of Congress' goals.
My written testimony includes comments in other areas of
great interest to AT&T, including the band plan, the need to
get the engineering right, the efforts of the industry to find
consensus, and the role unlicensed services can play in this
auction. As to broadcaster participation, AT&T believes that
broadcasters who come to the auction table are not selling a
broadcast business. They are relinquishing their rights to 6
megahertz of spectrum, much needed for mobile wireless use. An
evaluation mechanism adopted in the reverse auction should be
consistent with that reality and opening prices should be set
at a level that will encourage participation.
In conclusion, this auction presents enormous opportunity
and risk. The stakes are as high as the issues are complex.
AT&T remains confident that under the able leadership of
Chairwoman Clyburn, Commissioners Pai and Rosenworcel, and
Commission staff led by Mr. Epstein, the FCC will adopt auction
rules that maximize participation and prospects for a
successful auction, with all the intended benefits envisioned
by Congress.
Before I conclude, one comment on something Ms. Ham said.
She indicated that we got a lot of our low band spectrum for
free. That is incorrect. Although the 850 allocations were
originally allocated to incumbents, those licenses have changed
hands many times in the secondary market, and the vast majority
of AT&T's portfolio of 850 spectrum was purchased in the
secondary market, and I can assure you, we paid big values for
that spectrum. I just wanted to correct that one fact, and I
appreciate your time.
[The prepared statement of Ms. Marsh follows:]
[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.
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