I just returned from CTIA's Wireless 2003 Convention, and I am happy to be able to report to this Committee that there is a palpable sense of optimism about the future of the wireless industry.  We have hard work before us, but the wireless industry looks forward to the challenge. Our convention serves to highlight new advances currently operating abroad and new prototypes for the wireless industry here at home.  Our vibrant, competitive wireless industry is putting new products in the hands of American consumers.  But, the wireless industry also recognizes that the essential ingredient for us to do so - radio spectrum - exists because of the hard work and continued attention of this Committee and the Administration to sound spectrum management.  Today, this Committee confronts the specific issue of our nation's broken spectrum reimbursement process. I am happy to report that the wireless industry fully supports H.R. 1320, the Commercial Spectrum Enhancement Act, because, if passed into law, our nation's spectrum management and reimbursement process would be improved, and improved significantly. 

The birth of modern wireless technology took place twenty years ago.  Over this time period, we have seen wireless service far exceed growth expectations.  Currently, there are more than 141 million wireless subscribers, each consuming more and more minutes of use, not only for traditional voice operations but also for new possibilities in the world of wireless data.  Wireless remains a competitive industry and more and more American consumers are turning off their wireline phones and making a wireless phone their primary mode of communication.  This tremendous growth focuses the wireless industry on our lifeblood - radio spectrum. 

The spectrum management issues we face are by no means new issues.  The preparations for the 1992 World Radio Conference identified the need for the U.S. to add significant spectrum for commercial uses, with that spectrum harmonized to coincide with spectrum allocations of the rest of the world.  Unfortunately, for much of the next decade, the hard decisions required to deliver on this need were delayed and largely ignored.  Fortunately, this spectrum process has been vigorously pursued in the past few years - beginning at the end of the previous Administration, and with notable energy and progress from the beginning of the current Administration.  

Positive results have been achieved.  After considerable coordination amongst the Congress, the Administration, the Department of Defense, the FCC and the wireless industry, the NTIA delivered on a plan to provide an additional 90 MHz of spectrum, pairing 1710 to 1755 MHz with 2110 to 2155 MHz.  The NTIA's solution means that the wireless industry can get the spectrum needed for the wireless industry to continue to innovate and grow. 

The legislation before us today would fulfill the other half of the equation - as it will allow our Department of Defense to do the same.

This legislation is the result of an extensive and deliberate process.  President Bush identified the need for a new relocation mechanism in both the FY03 and FY04 Budgets, "The Administration proposes to streamline this [relocation] process by creating a central spectrum relocation fund.  Auction receipts sufficient to cover agencies' relocation costs would be paid into the fund, and Federal agencies would be reimbursed for their relocation costs out of the fund."[1]  President Bush submitted legislation to this Committee in July 2002.  Chairman Upton introduced relocation legislation in the last Congress, in October 2002.  And, the wireless industry is pleased that this legislation was re-introduced last week by Chairman Upton and other members of this Committee. 

The wireless industry fully supported the creation of a relocation mechanism then and fully supports the Commercial Spectrum Enhancement Act (H.R. 1320) today.  We do so because this legislation meets three key policy principles:

First, H.R.1320 fully funds government relocation.  This has been a bedrock principle for the wireless industry since the beginning of the process with the Defense Department and the Administration. 

Second, H.R.1320 will result in workable timelines for both wireless industry and government incumbents. 

Third, H.R.1320 provides certainty and accountability in developing relocation cost estimates, using auction proceeds to fund relocations, and following relocation cost and timing estimates.  

This legislation accomplishes these principles and the wireless industry respectfully suggests that it deserves the support of all members of this Committee.  At its core, the legislation fulfills the promise to the Defense Department and other federal spectrum incumbents to reimburse them as they move to upgrade their systems at more secure frequencies, while at the same time ensuring a timely delivery of additional spectrum to the wireless industry to roll out new, advanced services to the American consumer.

Congress, the FCC and the Administration are currently examining the importance of sound spectrum management and I believe this legislation is a real step to fulfill that goal.  The FCC's Spectrum Policy Task Force Report issued in November 2002 explicitly endorses relocation legislation.  The report "supports existing legislative measures that would amend the Communications Act to authorize the use of auction funds to pay relocation expenses to Federal government incumbents."[2]  

The Commercial Spectrum Enhancement Act injects much needed certainty into our current reimbursement process.  It streamlines the spectrum management process by creating a migration plan for the federal entity that is beneficial to government users, as well as to the wireless industry and wireless consumers.  Auction revenues are used to directly fund relocation and modernization.  Costs are identified with clear rights for both parties ahead of time, creating definitive timelines to expedite relocation.  The practical effect is that the federal entity can upgrade and transition to more modern and efficient systems, while freeing up valuable harmonized spectrum that will bring new and innovative services to the marketplace for consumers.  By making spectrum acquisition costs more proximate to access to that spectrum, deployment costs are reduced and consumers benefit.  The wireless industry supports this legislation and hopes that it will become law in a timely manner. 

90 MHz Process.

U.S. and international efforts to identify spectrum for advanced mobile services by the International Telecommunication Union (ITU) began as early as the 1992 World Radio Conference.  Throughout the past decade, the process focused on both the quantity and location of spectrum to be made available for commercial services.  This is necessary because, unfortunately, spectrum is not fungible.  It matters not only how much spectrum is provided, but also where that spectrum is located.  Spectrum must not only be technically suitable, it must also be compatible with international allocations.  Consumers benefit most if additional spectrum is not only technically capable of being used for mobile functions but also is harmonized with other nations' commercial mobile spectrum allocations.  Harmonized spectrum offers important economic benefits for consumers, operators and manufacturers.  Larger volume means lower R&D and production costs for both handsets and network infrastructure and new products and services will get to market faster - all to the benefit of consumers. 

The Congress and Executive Branch devoted significant resources to determine how best to make additional harmonized spectrum available to accommodate growth and the next generation of mobile wireless services.  Efforts by the National Telecommunications and Information Administration (NTIA), the Federal Communications Commission (FCC), and the Department of Defense focused on the 1710-1850 MHz and 2110-2170 MHz bands.  These bands were consistent with bands identified for commercial mobile service by the ITU, and are currently being used or plan to be used for these services in most other countries around the world.

In July 2002, Commerce Secretary Evans, along with NTIA Administrator Victory and FCC Chairman Powell, announced that 90 MHz of additional spectrum in these bands would be made available for commercial uses.  Tom Wheeler, President & CEO of CTIA, stated at the time that:

As we talk of the economy, I want to emphasize the stability that will result from this action. For too long, spectrum decisions have been an unstable dynamic driven by ad hoc budget determinations. Today's decision eliminates that instability. Thanks to the leadership of the Bush Administration there is now the certainty of knowing not only that when spectrum is needed it will be there, but also that rational planning, rather than irrational "it may never come again" splurging, is feasible for prudent managers.

We are neither at the beginning, nor the end of this process. We are at a fork in the road. With this report, our government has chosen to go down the path of economic growth, increased consumer service, and improved military communication capabilities. It is a clear win for the economy, a win for consumers, and a win for national security.  

I can only reemphasize these comments today. By ensuring the efficient delivery of the 90 MHz NTIA plan, H.R.1320 is a win-win-win - a win for the economy, a win for consumers, and a win for national security.

Reimbursement Mechanisms - Current & Proposed

Mr. Chairman and members of the Committee, this legislation corrects the inefficiencies embedded in our nation's current reimbursement process.

The current process is defined in two key laws.  In 1993, the Omnibus Reconciliation Act of 1993 (OBRA 93) authorized the FCC to use competitive bidding (auctions) for the reassignment and licensing of spectrum frequencies for commercial mobile services.  And, in 1998, Congress passed the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999.  The "Thurmond Act" included provisions that established the current reimbursement process when spectrum is transferred from federal government to private use.  The Act authorizes federal entities to accept payments when they relocate or modify their frequency use to a non-Federal user of the spectrum. 

While addressing the relocation challenge in a general way, there are several practical problems with the current process.   I submit that the proposed legislation appropriately responds to these practical problems: 

First, no surprises!  So, the U.S. taxpayer gets the full benefits from auctioned spectrum.  The current process does not guarantee either the cost or the timetable for spectrum availability at the front-end, when the private sector is expected to determine how much to bid at auction.  By its very nature, this process adds uncertainty and time to the relocation process.  This uncertainty lowers the value at auction.   

The proposed legislation offers up-front certainty on both costs and timetables.  It requires the NTIA to take actions necessary to ensure a timely relocation of the spectrum.  At least six months prior to an auction, the NTIA on behalf of the affected federal entities and after OMB review must notify the FCC and Congress not only of estimated relocation costs, but also of the timelines to vacate the spectrum.  

Second, detailed monitoring.  While the current process requires some relocation cost estimates, these are not reviewed by the Executive Branch's CFO, the Office of Management & Budget (OMB).  Worse, when it actually comes to determining the final costs, these are determined by negotiations with each Federal entity that utilizes the spectrum at issue, or by an arbitration process if the parties cannot agree.  The proposed legislation adds significant OMB and NTIA review of both cost estimates and actual spending. 

Third, Congressional oversight added.  The current process provides only for bare-bones Congressional involvement, and then only at the very end of the process.  (Certain Committees would review an Executive Branch certification that the relocation process was complete, and this only applies when Defense Department spectrum is involved.  This step does not even occur for any other relocation.)  Congress should be involved during the process - not at the end when it is likely that nothing can be done to fix any problems.  The proposed legislation requires that relocation funds cannot be spent until 30 days after the OMB submits to the Commerce and Appropriations Committees a detailed description about how the funds will be spent and the timeline for relocation.   The legislation also requires annual reports to Congress on all pending relocations. 

Fourth, sound spectrum management, not budget politics.  This proposed legislation reduces the incentives for budget politics to drive spectrum management by recognizing - up-front - that spectrum auctions must pay for the full cost of relocation.  This process will force budgeteers to recognize only the true, or "net," receipts of an auction.  This helps reduce budgeteer's temptations to force government relocations based on budget timetables instead of sound spectrum management. 

Fifth, potential national security concerns avoided.  The current process involves the private sector in direct relocation negotiations with government incumbents.  Since relocations may involve national security systems, private sector participation may be unwise.  The proposed legislation keeps the process where it belongs - among government officials. 

Sixth, since spectrum is licensed according to geographic area, different carriers would get licenses covering different areas.  The current process offers no fix to the very real problem of determining which auction "winner" pays what portion of a relocation involving government systems that overlap several licenses.  The current process could also leave auction "winners" with a bewildering array of government incumbents that may be relocated from the same slice of spectrum.  The proposed legislation avoids all these problems by using auction funds to pay for system-wide relocations.

 And, seventh, no pre-judging of the services to which government spectrum will be reassigned.  The proposed legislation establishes a relocation process for spectrum that is to be auctioned.  The proposed legislation does not direct that all government spectrum that is to be reallocated now or in the future be auctioned.  In other words, should Congress or the Administration decide in the future to reallocate some government spectrum for a "green field" of unlicensed use, this proposed legislation would not be triggered.  

Conclusion

A Spectrum Relocation Fund as established by H.R.1320 will provide opportunities for all parties involved.  Under the current regime, valuable spectrum remains underutilized and there is no workable path to guarantee that the Defense Department and other federal spectrum users have access to the most modern spectrum-based technologies.  The current regime prevents wireless carriers from obtaining the spectrum they need to provide the new and exciting services demanded by customers. The Commercial Spectrum Enhancement Act establishes a process for spectrum planning and management to ensure the timely availability of spectrum to meet the explosive demand for wireless communications, as well as to strengthen and modernize national security systems.  The events of the past few weeks illustrate the absolutely vital imperative for America's military to be equipped with the most efficient and most effective equipment.  H.R.1320, if passed into law, would help ensure that our spectrum management policies will be designed to accomplish exactly this national goal. 

As CTIA offered last July when joining the Administration's announcement that 90 MHz of additional spectrum would be made available for commercial uses, the wireless industry believes that the passage of H.R.1320 would deliver a "Win-Win-Win."  A win for the economy, a win for consumers and a win for national security.

[1] Budget of the United States Government, Fiscal Year 2003.  Appendix, at page 241.

[2] Spectrum Policy Task Force Report.  Federal Communications Commission.  ET Docket No. 02-135, November 2002. At page 69.