March 19, 2003

The Honorable Richard B. Cheney

President of the Senate

Washington, DC 20510-0010

Dear Mr. President:

Enclosed is a draft bill to amend the Communications Act of 1934 in
order to create a Spectrum Relocation Fund and to revise the procedures
under which Federal entities are paid for the costs

of relocating spectrum frequencies that are reallocated for auction to
commercial entities. This

proposal will provide more certainty for both Federal and commercial
entities in the auction of reallocated Federal spectrum.

Under current law, commercial entities must reimburse Federal entities
for the costs of relocating reallocated spectrum, and agencies are
authorized to accept these payments, but actual expenditures of these
payments must first be appropriated. This proposed legislation would
change the mechanism for payment to the agencies from direct payments by
the commercial entities to payments from a central Spectrum Relocation
Fund funded by auction receipts. The proposal would also authorize the
Federal entities to spend the payments without further appropriation.

The Office of Management and Budget (OMB) estimates that this proposal
would increase direct spending by \$2.5 billion from fiscal years
2005-2010, though final scoring of enacted legislation may differ from
these estimates. We have been advised by OMB that enactment of this
legislative

proposal would be in accord with the program of the President.

Sincerely,

Theodore W. Kassinger

Enclosure

IDENTICAL LETTERS SENT TO:

The Honorable Dennis Hastert

Speaker of the House of

Representatives

Washington, DC 20515-6501

The Honorable Thomas C. DeLay

Majority Leader

U.S. House of Representatives

Washington, D.C. 20515

The Honorable Nancy Pelosi

Minority Leader

House of Representatives

Washington, DC 20515-6502

The Honorable Bill Frist

Majority Leader

United States Senate

Washington, DC 20510-1601

The Honorable Thomas Daschle

Minority Leader

United States Senate

Washington, DC 20510-0010

The Honorable John McCain

Chairman, Committee on Commerce, Science

and Transportation

United States Senate

Washington, DC 20510-6125

The Honorable Ernest F. Hollings

Committee on Commerce,

Science and Transportation

United States Senate

Washington, DC 20510-6125

The Honorable W.J. "Billy" Tauzin

Chairman, Committee on Energy

and Commerce

House of Representatives

Washington, DC 20515-6115

The Honorable John D. Dingell

Committee on Energy and Commerce

House of Representatives

Washington, DC 20515-6115

**A BILL**

To amend the National Telecommunications and Information Administration
Organization Act to streamline procedures for paying Federal entities to
relocate from Federal spectrum.

***Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,***

**SECTION 1. SHORT TITLE.**

This Act may be cited as the AFederal Spectrum Relocation Payment
Procedures Act@.

**SECTION 2. ESTABLISHMENT OF FUND AND PROCEDURES.**

2.  

\(a\) **ESTABLISHMENT OF SPECTRUM RELOCATION FUND**.--- There is
established on the books of the Treasury a separate fund to be known as
the \"Spectrum Relocation Fund\" (in this section referred to as the
\"Fund\"), which is subject to the direction and control of the Office
of Management and Budget ("OMB").

> \(1\) The Fund will be credited with the amounts specified in section
> 309(j)(8)(D) of the Communications Act of 1934 (47 U.S.C. §
> 309(j)(8)(D)).
>
> \(2\) The amounts in the Fund are authorized to be used to pay
> relocation costs, as defined in section 113(g)(3) of the National
> Telecommunications and Information Administration Organization Act
> ("NTIA Act"), (47 U.S.C. § 923 (g)(3)). Such costs shall be determined
> by the Director of OMB.
>
> \(3\) Amounts made available pursuant to paragraph (2) shall be
> transferred to eligible Federal entities, as defined in section
> 113(g)(1) of the NTIA Act (47 U.S.C. §23(g)(1)). All such transfers
> are subject to prior approval by the Director of OMB. Such amounts
> shall be credited to the account which has incurred, or will incur,
> such costs, and shall remain available until expended. An eligible
> Federal entity that has received such amounts shall report its
> expenditures to OMB and shall transfer any amounts in excess of actual
> relocation costs back to the Fund not later than one year after the
> National Telecommunications and Information Administration has
> notified the Federal Communications Commission that the entity's
> relocation is complete, pursuant to section 113(g)(5) of the NTIA Act
> (47 U.S.C. § 923 (g)(5)).
>
> \(4\) If an eligible Federal entity receives transfers from the Fund
> exceeding one hundred ten percent of the estimated costs provided to
> the Federal Communications Commission pursuant to section 113(g)(4) of
> the National Telecommunications and Information Administration
> Organization Act (47 U.S.C. § 923 (g)(4)), the head of the agency
> must, within ninety days after receipt of such funds, report to the
> appropriate appropriations and authorizing committees on the expected
> use of the funds.

\(b\) **APPROPRIATION**. --- There are hereby appropriated from the Fund
such sums as are required to pay the costs specified in subsection
(a)(2).

\(c\) **ELIGIBILITY AND RELOCATION COSTS**. ---Section 113(g) of the
National Telecommunications and Information Administration Organization
Act (47 U.S.C. § 923(g)) is amended by striking paragraphs (1) through
(3) and inserting the following new paragraphs:

> A(1) **[Eligible Federal Entities]{.smallcaps}**.-Any Federal entity
> that operates a Federal Government station assigned to a band of
> frequencies specified in paragraph (2) and that incurs relocation
> costs because of the reallocation of frequencies from Federal use to
> non-Federal use is eligible for payment for such costs from the
> Spectrum Relocation Fund, in accordance with section 2 of the Federal
> Spectrum Relocation Payment Procedures Act. For purposes of this
> paragraph, Federal power agencies exempted under paragraph 113(c)(4)
> that choose to relocate from the frequencies identified for
> reallocation pursuant to subsection 113(a), are eligible to receive
> payment under this paragraph.
>
> \"(2) **[Eligible Frequencies]{.smallcaps}**.-The bands of eligible
> frequencies for purposes of this section are as follows:
>
> A(A) the 216-220 megahertz band, 1432-1435 megahertz band, 1710-1755
> megahertz band, and 2385-2390 megahertz band of frequencies; and
>
> \"(B) any other band of frequencies reallocated from Federal use to
> non-Federal use after January 1, 2002.
>
> "(3) **[Relocation costs]{.smallcaps}. -** (A) **'**Relocation costs'
> means the costs incurred by a Federal entity to achieve comparable
> capability of systems relocated to a new frequency assignment or
> alternative technology. Such costs include:

"(i) the costs of any modification or replacement of equipment,
software, facilities, operating manuals, training costs, or regulations
that are attributable to relocation;

> "(ii) the costs of all engineering, equipment, software, site
> acquisition and construction costs, as well as any legitimate and
> prudent transaction expense, including outside consultants, and
> reasonable additional costs incurred by the Federal entity that are
> attributable to relocation, including increased recurring costs
> associated with the replacement facilities;
>
> "(iii) to the extent that the Federal entity needs to accelerate the
> introduction of systems and equipment to allow for relocation earlier
> than the Federal entity planned, the costs associated with the
> accelerated replacement of systems and equipment;
>
> "(iv) the costs of engineering studies, economic analyses, or other
> expenses reasonably incurred in calculating the estimated relocation
> costs that are provided to the Commission pursuant to paragraph (4) of
> this subsection; and
>
> "(v) when the eligible frequencies as defined in paragraph (2) of this
> subsection are made available for private sector uses by competitive
> bidding and a Federal entity retains primary allocation or protected
> status in those frequencies for a period of time after the completion
> of the competitive bidding process, one-time costs of any modification
> of equipment reasonably necessary to accommodate such sharing.
>
> "(B) Upon timely request of a Federal entity, NTIA shall provide such
> entity with information regarding alternative frequency assignment(s)
> to which their radiocommunications operations could be relocated for
> purposes of calculating the estimated relocation costs and timelines
> to be submitted to the Commission pursuant to paragraph (4) of this
> subsection.

"(4) **[Notice to Commission of Estimated Relocation
Costs]{.smallcaps}**. - (A) At least six months prior to the
commencement of any auction of eligible frequencies defined in paragraph
(2), the NTIA, on behalf of the Federal entities and after review by the
Office of Management and Budget, shall notify the Commission of
estimated relocation costs and timelines for such relocation.

> "(B) To the extent practicable and consistent with national security
> considerations, the NTIA shall provide such information by the
> geographic location of the Federal entities' facilities or systems and
> the frequency bands used by such facilities or systems.

"(5) **[Implementation of Procedures. -]{.smallcaps}** The Ntia shall
take such actions as necessary to ensure the timely relocation of
Federal entities' facilities from frequencies defined in paragraph (2)
to facilities of comparable capability, provided that funds from the
Spectrum Relocation Fund established in section 2 of the Federal
Spectrum Relocation Fund Payment Procedures Act have been made available
to such entities. Upon a finding by the NTIA that a Federal entity has
achieved comparable capability of systems relocated to a new frequency
assignment or alternative technology, the NTIA shall terminate the
entity's authorization and notify the Commission that the entity's
relocation has been completed.".

\(d\) **AUCTION OF ELIGIBLE FREQUENCIES**. ---

> \(1\) Paragraph (3) of section 309(j) of the Communications Act (47
> U.S.C. §309(j)) is amended by:
>
> \(A\) striking "and" after subparagraph 309(j)(3)(D);
>
> \(B\) striking the period at the end of such subparagraph 309(j)(3)(E)
> and adding "; and" at the end thereof; and
>
> \(C\) adding after paragraph 3(E) the following new subparagraph
> 309(j)(3)(F):
>
> "(F) for any auction of spectrum described in 47 U.S.C. § 923(g)(2),
> the recovery of one hundred ten percent of estimated relocation costs
> as provided to the Commission pursuant to 47 U.S.C. § 923(g)(4). In
> addition, the Commission shall condition licenses assigned for the use
> of such spectrum by requiring that the licensee cannot cause harmful
> interference to the incumbent Federal entity until that entity's
> relocation is completed. The harmful interference restriction shall
> not be removed until the Commission has received notification from the
> National Telecommunications and Information Administration pursuant to
> section 113(g)(5) of the National Telecommunications and Information
> Administration Organization Act (47 U.S.C. § 923(g)(5))."

\(2\) Paragraph (4) of section 309(j) of the Communications Act (47
U.S.C. § 309(j)) is amended by:

> \(A\) striking "and" after subparagraph 309(j)(4)(E);
>
> \(B\) by adding at the beginning of subparagraph 309(j)(4)(F) "except
> as provided in 47 U.S.C. § 309(j)(4)(G),", by striking the period at
> the end of such subparagraph, and adding "; and" at the end thereof;
> and
>
> \(C\) adding after paragraph (4)(F) the following new subparagraph
> 309(j)(4)(G):
>
> "(G) prescribe methods by which the total cash proceeds from any
> auction of spectrum described in 47 U.S.C. § 923(g)(2) shall at least
> equal one hundred ten percent of the total estimated relocation costs
> provided to the Commission pursuant to 47 U.S.C. § 923(g)(4). The
> Commission shall not conclude any auction of spectrum described in 47
> U.S.C. § 923(g)(2) if the total cash proceeds attributable to such
> spectrum are less than one hundred ten percent of the total estimated
> relocation costs provided to the Commission pursuant to 47 U.S.C. §
> 923(g)(4). If the Commission is unable to conclude an auction for the
> foregoing reason, the Commission shall return within 45 days from the
> auction cancellation date any deposits from participating bidders held
> in escrow.".

(e**) DEPOSIT OF PROCEEDS**. ---Paragraph (8) of section 309(j) of the
Communications Act of 1934 (47 U.S.C. § 309(j)) is amended by:

\(1\) adding in subparagraph (A) after the phrase "subparagraph (B)",
the phrase "or subparagraph (D)"; and

\(2\) adding at the end the following new subparagraph:

> \"(D) **[Disposition of Cash Proceeds]{.smallcaps}**.-Cash proceeds
> attributable to the auction of any spectrum described in 47 U.S.C. §
> 923(g)(2) shall be deposited in the Spectrum Relocation Fund
> established under section 2 of the Federal Spectrum Relocation Payment
> Procedures Act, and shall be available in accordance with that
> section.".

\(f\) **AVAILABILITY OF AMOUNTS IN FUND**. --- Unless made available
pursuant to section 2(a) of this Act, the Office of Management and
Budget shall transfer amounts in the Fund to the General Fund of the
Treasury ten years after their initial deposit in the Fund.

\(g\) **EXEMPTION FROM SEQUESTRATION**. -- The Spectrum Relocation Fund
shall be exempt from reduction under any order issued under section 254
of the Balanced Budget and Emergency Deficit Control Act of 1985, as
amended.

**SECTION 3. CONSTRUCTION --** Nothing in this Act is intended to modify
Section 1062(b) of the National Defense Authorization Act for Fiscal
Year 2000, Public Law No. 106-65.

**SECTIONAL ANALYSIS**

This legislative proposal implements the Spectrum Relocation Fund
proposal in the President's FY 2004 Budget. The proposal would
streamline the current process for paying Federal agencies that must
relocate from Federal spectrum that has been reallocated for auction to
commercial users. Under current law, winning bidders must negotiate with
Federal entities upon the close of an auction and pay the agencies
directly for their relocation costs. This legislative proposal would
streamline the process by creating a central Spectrum Relocation Fund.
Auction receipts would be paid into the Fund, and, after approval by the
Director of the Office of Management and Budget, Federal agencies would
be paid for their relocation costs out of the Fund. This legislative
proposal also provides agencies mandatory spending authority for these
payments. Federal agencies would be required to return any funds in
excess of actual relocation costs to the Spectrum Relocation Fund.

## Section 1

Section 1 of the proposal provides that the Act may be cited as the
"Federal Spectrum Relocation Payment Procedures Act."

## Section 2

Section 2 establishes the fund, eligibility, and procedures for payments
to Federal entities that must relocate from reallocated Federal spectrum
that is auctioned to commercial users.

Subsection (a) creates a Spectrum Relocation Fund which will be managed
by the Office of Management and Budget (OMB).

Paragraph (1) provides that receipts associated with the auction of
eligible reallocated spectrum will be credited to the account pursuant
to 47 U.S.C. § 309(j)(8)(D) (as established by

subsection 2(e) of this bill).

Paragraph (2) authorizes the Fund to be used to pay a Federal entity's
relocation costs, as defined in 47 U.S.C. § 923(g)(3) (as revised by
Subsection 2(c) of this bill) and as determined by the Director of OMB.

Paragraph (3) specifies that amounts made available pursuant to
paragraph (2) shall be transferred to the eligible Federal entities, as
defined in 47 U.S.C. § 923(g)(1) (as revised by subsection 2(c) of this
bill). All transfers are subject to the prior approval of the Director
of OMB. The amounts transferred or appropriated shall be credited to the
eligible entities' budget account that has incurred or will incur
relocation costs. Such amounts are available until expended. An eligible
entity that receives such payments will report its actual expenditures
to OMB and shall return any such payments in excess of actual costs to
the Fund within one year after NTIA has notified the Federal
Communications Commission (FCC) that the entity's relocation is complete
pursuant to 47 U.S.C. § 923(g)(5) (as established by subsection 2(c) of
this bill).

Paragraph (4) specifies that eligible Federal entities that receive
transfers from the Fund for payment of relocation costs in excess of one
hundred ten percent of the estimated cost provided to the FCC in advance
of an auction of eligible spectrum (pursuant to 47 U.S.C. § 923(g)(4),
as established by subsection 2(c) of this bill) must report to the
appropriate appropriations and authorization committees on the expected
use of such funds within ninety days of receiving such funds.

Subsection (2)(b) appropriates from the Fund such sums as are necessary
to pay the costs specified in subsection (2)(a)(2), thus providing the
eligible Federal entities direct spending authority for the transfers
received from the Fund.

Subsection (2)(c) amends subsection 113(g) of the National
Telecommunications and Information Administration Organization Act by
striking existing paragraphs (1) through (3) and replacing them with new
paragraphs.

New paragraph (1) of subsection 113(g) provides that Federal entities
that relocate because of a reallocation of frequencies from Federal to
non-Federal use are eligible to be paid for such costs from the Spectrum
Relocation Fund. Because Federal power agencies, as defined in
subparagraph (4)(C) of subsection 113(c) of the NTIA Organization Act,
are exempted from having to relocate from the frequencies identified in
new subparagraph (2)(A), the provision specifies that they may also
receive payments from the Fund if they voluntarily relocate.

New subparagraph (2)(A) of subsection 113(g) establishes that the
216-220 megahertz band, 1432-1435 megahertz band, 1710-1755 megahertz
band, and 2385-2390 megahertz band of frequencies, which have already
been identified for reallocation, are eligible for relocation payments.

New subparagraph (2)(B) of subsection 113(g) establishes that any other
band of frequencies reallocated from Federal use to non-Federal use
after January 1, 2002, is eligible for relocation payments.

New subparagraph (3)(A) of subsection 113(g) defines relocation costs as
the costs incurred by the Federal entity to achieve comparable
capability of systems that are relocated to a new frequency or
alternative technology. Such costs include the costs of any modification
or replacement of equipment, software, facilities, operating manuals,
training costs, or regulations that are attributable to relocation. Such
costs also include the costs of all engineering, equipment, software,
site acquisition and construction costs; legitimate and prudent
transaction expenses, including outside consultants; and reasonable
additional costs incurred by the Federal entity that are attributable to
relocation, including increased recurring cost associated with the
replacement facilities. Costs associated with the accelerated
replacement of systems and equipment if a Federal entity must accelerate
the already-planned introduction of systems and equipment in order to
relocate are also included. Such costs also include the costs of
engineering studies, economic analyses, or other expenses reasonably
incurred in calculating the estimated relocation costs that are provided
to the FCC pursuant to new paragraph (4) of this subsection. Finally,
when the eligible frequencies as defined in new paragraph (2) have been
made available via competitive bidding, such costs also include one-time
equipment modification costs incurred by a Federal entity that are
reasonably necessary to accommodate new private sector entrants into the
frequencies on a shared basis or during a transition period in which the
Federal entity

relocates its system.

New subparagraph (3)(B) of subsection 113(g) provides that, upon timely
request of a Federal entity, NTIA will provide such entity with
information regarding alternative frequency assignment(s) for purposes
of calculating the estimated relocation costs and timelines to be
submitted to the Commission pursuant to paragraph (4) of this
subsection.

New subparagraph (4)(A) of subsection 113(g) provides that on behalf of
the eligible Federal entities and after review by OMB, NTIA will provide
estimated relocation costs and timelines for such relocation to the FCC
six months in advance of an auction of eligible frequencies described in
new paragraph (2) of subsection 113(g).

New subparagraph (4)(B) of subsection 113(g) provides that to the extent
practicable and consistent with national security considerations, the
information provided in advance of the auction will be by geographic
location of the Federal entities' facilities and by the frequency bands
used by such facilities or systems.

New paragraph (5) of subsection 113(g) provides that NTIA shall take
such actions as necessary to ensure the timely relocation of Federal
entities' facilities from the eligible frequencies to comparable
facilities after funds from the Spectrum Relocation Fund have been made
available to the eligible Federal entities. Upon finding that the
Federal entity has achieved comparable capability of systems relocated
to a new frequency assignment or alternative technology, NTIA shall
terminate the entity's authorization and notify the FCC that the
entity's relocation is completed.

Subsection (2)(d) amends paragraphs (3) and (4) of subsection 309(j) of
the Communications Act of 1934. Paragraph (1) of subsection (2)(d) adds
a subparagraph (F) to paragraph (3) of subsection 309(j) requiring that
in designing an auction and specifying eligibility and other
characteristics of auctioned licenses, the FCC must design an auction of
eligible spectrum as defined in 47 U.S.C. § 923(g)(2) (as revised by
subsection 2(c) of this bill) so that the auction recovers one hundred
ten percent of the estimated relocation costs as provided to the FCC
pursuant to 47 U.S.C. § 923(g)(4) (as established by subsection 2(c) of
this bill). In addition, it requires the FCC to condition the licenses
for the use of such spectrum by prohibiting the licensee from causing
harmful interference to the incumbent Federal entity until such time as
NTIA notifies the FCC that the entity's relocation is complete pursuant
to 47 U.S.C. § 923(g)(5) (as established by subsection 2(c) of this
bill).

Paragraph (2) of subsection (2)(d) adds a subparagraph (G) to paragraph
(4) of subsection 309(j) of the Communications Act of 1934 requiring the
FCC to prescribe methods by which the total cash proceeds from the
auction of eligible spectrum shall at least equal one hundred ten
percent of the total estimated relocation costs provided to the FCC by
NTIA in advance of the auction, pursuant to 47 U.S.C. § 923(g)(4) (as
established by subsection 2(c) of this bill). The FCC is prohibited from
concluding the auction if the total cash proceeds of the auction are
less than the total estimated relocation costs. If the FCC cannot
conclude the auction because the proceeds do not equal total estimated
relocation costs, the FCC must return the bidder's deposits within 45
days after cancellation of the auction. Subparagraph (F) is amended to
conform the provision on reserve prices and minimum bids to account for
the specific requirements for recovering the relocation costs of Federal
entities that must relocate from eligible reallocated spectrum.

Subsection 2(e) amends paragraph (8) of subsection 309(j) of the
Communications Act of 1934 to provide for the payment of auction
proceeds into the Spectrum Relocation Fund by adding subparagraph (D)
which requires the cash proceeds attributable to the auction of spectrum
described in 47 U.S.C. § 923(g)(2) (as revised by subsection 2(c) of
this bill) to be deposited in the Spectrum Relocation Fund (as
established by subsection 2(a) of this bill). The funds would be
available in accordance with this bill.

Subsection 2(f) directs that, unless made available under subsection
2(a) of this bill, the Office of Management and Budget shall transfer
amounts remaining in the Spectrum Relocation Fund to the General Fund in
the Treasury ten years after their initial deposit.

Subsection 2(g) specifies that the Fund is exempt from sequestration.

## Section 3

Section 3 states that nothing in the Federal Spectrum Relocation Payment
Procedures Act is intended to modify Section 1062(b) of the National
Defense Authorization Act for Fiscal Year 2000, Public Law No. 106-65,
which requires that "comparable" spectrum be made available to the
Department of Defense to preserve essential military capability if the
Department is required to surrender use of spectrum in which it was a
primary user.