**Remarks of**

**Michael K. Powell**

**Chairman**

**Federal Communications Commission**

**at the**

**Silicon Flatirons Telecommunications Program**

**University of Colorado at Boulder**

**"BROADBAND MIGRATION III:**

**NEW DIRECTIONS IN WIRELESS POLICY"**

**October 30, 2002**

**\[as prepared for delivery\]**

# I. [Introduction]{.underline}

Good afternoon. I want to thank Professor Phil Weiser and the Silicon
Flatirons Telecommunications Program for inviting me to Boulder. I can
think of no better place than the foothills of the Rockies to talk about
\-- what else \-- the broad new vistas and open spaces in spectrum
policy presented by technological innovation. The mountains we must
climb to achieve these opportunities are indeed steep and the climb is
long and demanding -- but like all accomplishments it begins with a
single step. Today I would like to begin that process by setting out
some of my thoughts about the next generation of spectrum policy.

Spectrum policy reform is a crucial initiative. Effective spectrum
policy is essential to traditional spectrum-based services, such as
mobile phones and Direct Broadcast Satellite. However, the rewards of
sound spectrum policies go far beyond traditional stakeholders -- they
are integral parts of the long term success of FCC initiatives in
Broadband, Competition Policy, Media Regulation, and Homeland Security.
Ultimately, like all of our focus areas, spectrum policy must strive to
maximize the unique benefits offered by spectrum-based services and
devices to the American people.

# II. [Spectrum Policy: At the Center of Other Policy Objectives]{.underline}

First, let me explain how our spectrum policy reform initiatives further
the Commission's other important objectives. A little over a year ago, I
outlined a 5-pronged agenda that would guide the FCC's work and our role
in the "Digital Broadband Migration." That is, breakthroughs in
technology will drive an exodus from existing analog platforms to
digital architecture. The new networks would be more efficient and
provide opportunities for an expanded array of applications and
communications services for consumers. The notion of migration was that
the transition would be long, and perhaps arduous, but was nonetheless
essential for survival. In addressing this migration, I outlined five
specific areas for Commission attention: (1) Broadband Deployment, (2)
Competition Policy, (3) Re-examination of the Foundations of Media
Regulation, (4) Homeland Security, and, our focus today, (5) Spectrum
Policy. When we improve the way that spectrum is regulated -- increasing
access, availability, and efficiency -- our other four initiatives are
also advanced. Here are just a few potential examples:

-   [Broadband Deployment]{.underline}: Spectrum-based paths to homes
    and businesses hold great promise for the delivery of high speed
    internet. These paths ride on a variety of platforms: fixed and
    mobile, terrestrial and satellite, licensed and unlicensed.

-   [Competition Policy]{.underline}: Consumers are beginning to "cut
    the cord." Consumers, especially university students, are doing it
    more and more -- replacing their wireline phones with mobile phones
    and other mobile devices for their core communications needs.
    Licensed wireless services have been a resounding success at
    introducing facilities-based local competition.

-   [Media Regulation/Digital Television]{.underline}: At its core, the
    DTV transition is about using the spectrum resource more efficiently
    and effectively. Whether it's the broadcasters of the future or new
    spectrum-based services in the old analog bands, digital television
    and spectrum policy are essential companions. Similarly, perhaps the
    most important developments for media consumers over the past decade
    has been the phenomenal growth and introduction of satellite
    television and radio as alternative -- and spectrally-based --
    platforms for digital multichannel video and audio services.

-   [Homeland Security]{.underline}: Spectrum is an essential input in
    the continuing fight against terrorism, a force multiplier for our
    military and an everyday necessity for public safety officials. We
    must continue to work with the Administration's Homeland Defense
    leadership as well as the public safety and critical infrastructure
    communities within the FCC's jurisdiction to ensure that adequate
    spectral resources are available to facilitate reliable and
    interoperable communications.

The common link in all of these policy areas that I have just briefly
described, and of course our spectrum policies, is the growing
centrality of the consumer; shifting more control to consumers to choose
their communications service, their provider, their equipment, and their
quality of service. Sound spectrum policy is a central component of the
great digital migration for all Americans.

III\. [Consumers Deserve a New Spectrum Policy Paradigm]{.underline}

All consumers, whether they are John and Jane Q. Public or the Boulder
Police Department, deserve a new spectrum policy paradigm that is rooted
in modern-day technologies and markets. We are living in a world where
demand for spectrum is driven by an explosion of wireless technology and
the ever-increasing popularity of wireless services.

Nevertheless, we are still living under a spectrum "management" regime
that is 90 years old. It needs a hard look, and in my opinion, a new
direction. Historically, I believe there have been four core assumptions
underlying spectrum policy: (1) unregulated radio interference will lead
to chaos; (2) spectrum is scarce; (3) government command and control of
the scarce spectrum resource is the only way chaos can be avoided; and
(4) the public interest centers on government choosing the highest and
best use of the spectrum.

Today's environment has strained these assumptions to the breaking
point. Modern technology has fundamentally changed the nature and extent
of spectrum use. So the real question is, how do we fundamentally alter
our spectrum policy to adapt to this reality? The good news is that
while the proliferation of technology strains the old paradigm, it is
also technology that will ultimately free spectrum from its former
shackles. 

1\. [Interference Leads to Chaos]{.underline}

From 1927 through to today, interference protection has always been at
the core of federal regulators' spectrum mission. The Radio Act of 1927
empowered the Federal Radio Commission to address interference concerns.
While interference protection remains essential to our mission,
interference rules that are too strict limit users' ability to offer new
services; rules that are too lax may harm existing services. I believe
the Commission should continuously examine whether there are market or
technological solutions that can -- in the long run -- replace or
supplement pure regulatory solutions to interference.

The FCC's current interference rules were typically developed based on
the expected nature of a single service's technical characteristics in a
given band. The rules for most services include limits on power and
emissions from transmitters. Each time the old service needs to evolve
with the demands of its users, the licensee has to come back to the
Commission for relief from the original rules. This process is not only
inefficient, it can stymie innovation.

Due to the complexity of interference issues and the RF environment,
interference protection solutions may be largely technology-driven. As
an illustration of the shortcomings of our current rules, I will point
to a lesson I learned from my first technological mentor, the University
of Colorado's own Dale Hatfield. Dale taught me that interference is not
solely "caused" by transmitters, which many seem to assume -- and on
which our regulations are almost exclusively based. Instead,
interference is often more a product of receivers; that is receivers are
too dumb or too sensitive or too cheap to filter out unwanted signals.
Yet, our decades-old rules have generally ignored receivers.

Not all gaps in the Commission's current interference approach are quite
as obvious as the lack of receiver standards. The Commission will also
be challenged to understand diverse and rapidly changing communications
technologies and their interference policy impact. Emerging
communications technologies are becoming more tolerant of interference
through sensory and adaptive capabilities in receivers. That is,
receivers can "sense" what type of noise or interference or other
signals are operating on a given channel and then "adapt" so that they
transmit on a clear channel that allows them to be heard. Our new
policies should facilitate and support such innovative technologies that
may increase spectral efficiency.

Both the complexity of the interference task \-- and the remarkable
ability of technology (rather than regulation) to respond to it \-- are
most clearly demonstrated by the recent success of unlicensed
operations. According to the Consumer Electronics Association, there is
already a complex variety of unlicensed devices in common use, including
garage and car door openers, baby monitors, family radios, wireless
headphones, and millions of wireless Internet access devices using Wi-Fi
or Bluetooth technologies. Yet despite the sheer volume of devices and
their disparate uses, manufacturers have developed technology that
allows receivers to sift through the noise to find the desired signal.

Our mission should be to build a policy that recognizes the diverse and
complex opportunities presented by changes in the role of interference
in spectrum policy.

2\. [Scarcity]{.underline}

Much of the Commission\'s spectrum policy was driven by the assumption
of acute spectral scarcity - the assumption that there is never enough
for those who want it. Under this view, spectrum is so scarce that
government rather than market forces must determine who gets to use the
spectrum and for what. The spectrum scarcity argument shaped the Supreme
Court\'s *Red Lion* decision, which gave the Commission broad discretion
to regulate broadcast media on the premise that spectrum is a unique and
scarce resource. Indeed most assumptions that underlie the current
spectrum model derive from traditional broadcasting.

But just as the presumptions of *Red Lion* and similar broadcasting
regulation based on scarcity have been called into doubt by the
proliferation of media sources, so too must we question the continued
utility of the pervasive scarcity assumption for spectrum-based
services. The Commission has recently conducted a series of tests to
assess actual spectrum congestion in certain locales. These tests,
which were conducted by the Commission\'s Enforcement Bureau in
cooperation with the Task Force, measured use of the spectrum at five
major U.S. cities. The results showed that while some bands were heavily
used, others either were not used or were used only part of the time. It
appeared that these \"holes\" in bandwidth or time could be used to
provide significant increases in communication capacity, without
impacting current users, through use of new technologies. Although not
dispositive, these results call into question the traditional
assumptions about congestion. Indeed it appears that most of spectrum is
not in use most of the time.

But even these results, if generally applicable, would be less important
if it were not for the birth of new technological tools that allow the
public to take advantage of available spectrum resources without
diminishing other users' rights. Today's digital migration means that
more and more data can be transmitted in less and less bandwidth. Not
only is less bandwidth used, but innovative technologies like software
defined radio and adaptive transmitters can bring additional spectrum
into the pool of spectrum available for use. Scarcity will not be
replaced by abundance; there will still be places and times when
services are spectrum constrained. However, scarcity need no longer be
the lodestar by which we guide the spectrum ship of state.

3\. [Government Command and Control]{.underline}

While the wireless world has changed rapidly, government spectrum policy
continues to be constrained by allocation and licensing systems from a
bygone era. Change is inhibited by the "mother may I" phenomenon --
businesses must go to the FCC for permission before they can modify
their spectrum plans to respond to consumer demand.

The theory back in the 1930s was that only government could be trusted
to manage this scarce resource and ensure that no one got too much of
it. Unfortunately, spectrum policy is still predominantly a "command and
control" process that requires government officials \-- instead of
spectrum users \-- to determine the best use for spectrum and make value
judgments about proposed \-- and often over-hyped \-- uses and
technologies. It is an entirely reactive and too easily politicized
process.

Although Congress and the Commission have actually begun shifting away
from this model, the Commission still finds itself continually deciding
and revisiting difficult technical questions concerning spectrum
allocation, geographical coverage, system configurations,
channelization, eligibility, auction exemptions, transferability,
out-of-band emissions, and other technical criteria. Anyone who has been
in Washington more than five minutes knows that government
decision-making is measured in months and years rather than
milliseconds. Even with auctions and a shift to more market-oriented
policies, it is painfully obvious that we are still operating a kilobyte
spectrum regulation device in a gigabyte spectrum world.

In the last twenty years, two alternative models to command and control
have developed, and both have flexibility at their core. First, the
"exclusive use" or quasi-property rights model, which provides
exclusive, licensed rights to flexible-use frequencies, subject only to
limitations on harmful interference. These rights are freely
transferable. Second, the "commons" or "open access" model, which allows
users to share frequencies on an unlicensed basis, with usage rights
that are governed by technical standards but with no right to protection
from interference. The Commission has employed both models with
significant success. Licensees in mobile wireless services have enjoyed
quasi-property right interests in their licensees and transformed the
communications landscape as a result. In contrast, the unlicensed bands
employ a commons model and have enjoyed tremendous success as hotbeds of
innovation. These successes give us some real-world experience on new
and innovative alternatives to command and control, and we will
undoubtedly use both models as we move forward.

4\. [Public Interest]{.underline}

The fourth and final element of traditional spectrum policy is the
"public interest" standard. The phrase (or something similar), "public
interest, convenience or necessity" was a part of the Radio Act of 1927
and likely came from other "utility" regulation statutes. The standard
was largely a response to the interference and scarcity concerns that
were created in the absence of such a discretionary standard in the 1912
Act. The "public interest, convenience and necessity" became a standard
by which to judge between competing applicants for a scarce resource --
and a tool for ensuring interference did not occur. The public interest
under the command and control model often decided which companies or
government entities would have access to the spectrum resource. At that
time, spectrum was not largely a consumer resource -- but rather was
accessed by a relatively select few. However, Congress wisely did not
create a static public interest standard for spectrum allocation and
management.

Indeed, if the Commission is to do its job, the public interest must
reflect the realities of the marketplace and current spectrum use.
Today, I would suggest that full and complete consumer choice of
wireless devices and services is the very meaning of the public
interest. Certainly government telling consumers what types of services
and devices they should have or own is not my view of the public's
interest.

\* \* \* \* \*

So, how do we develop a policy that moves us from the four mainstays of
traditional spectrum management into a more compelling model for this
century? Since Professor Coase started the discussion on spectrum and
property rights with his seminal article in 1959, we have had academic
conferences, reams of economic papers, scores of academics debating the
merits of FCC spectrum policy and, yet, only a modest amount of spectrum
has been moved into new paradigms. That is why I established the
Spectrum Policy Task Force: to lay the foundation for a new, bold
approach to spectrum policy that would help us break out of the box.

IV\. [Spectrum Policy Reform]{.underline}

In June 2002, we created the Spectrum Policy Task Force to provide
specific recommendations to the Commission for ways to develop a more
integrated, market-oriented spectrum policy approach that provides
greater certainty, minimal regulatory intervention, and greater benefits
to consumers. The Task Force will assist the Commission in evaluating
policies regarding interference protection, spectral efficiency,
effective public safety communications, and various spectrum usage
models. In the end, the Task Force's mandate is to think creatively and
comprehensively about our full panoply of spectrum policies -- and
provide an intellectual foundation for future policy.

In only a few months, the Task Force's team of high-level,
multi-disciplinary professional FCC staff -- economists, engineers and
attorneys -- from across the Commission's Bureaus and Offices has
solicited over 200 comments from the public on a wide range of
questions, held four public workshops, and will soon submit its findings
and recommendations. I believe that the upcoming Report will serve as a
catalyst for long-needed changes in spectrum policy.

So what are some of the key steps toward reform?

> 1\. [Ad Hoc, Rigid Interference Rules Evolve to a New Paradigm for
> Interference Prediction and Avoidance -- Interference
> Temperature.]{.underline}

The time has come to consider an entirely new paradigm for interference
protection. A more forward-looking approach requires that there be a
clear quantitative application of what is acceptable interference for
both license holders and the devices that can cause interference.
Transmitters would be required to *[ensure]{.underline}* that the
interference level -- or "interference temperature" \-- is not exceeded.
Receivers would be required to *[tolerate]{.underline}* an interference
level.

I anticipate that the Commission will be seeking a lot of input from the
technical community on these new interference concepts because this
would mark a significant change. Rather than simply saying your
transmitter cannot exceed a certain power, we instead would utilize
receiver standards and new technologies to ensure that communication
occurs without interference, and that the spectrum resource is fully
utilized. So, for example, perhaps services in rural areas could utilize
higher power levels because the adjacent bands are less congested
therefore decreasing the need for interference protection.

During my time at the Commission, we have been forced repeatedly to
reject applications for new services because the receivers of nearby
services were so poorly made that they could not tolerate the
interference caused by the new service. By looking at the spectral
environment more comprehensively and dynamically through the more
focused measurement of interference temperature at the receiver, we
better distribute the responsibilities for spectrum use and achieve
greater value for American consumers.

2.  [Scarcity Mitigated by Access to the 4^th^ Dimension --
    Time]{.underline}

In analyzing the current use of spectrum, the Task Force took a unique
approach, looking for the first time at the *entire* spectrum, not just
one band at a time. This review prompted a major insight: there is a
substantial amount of "white space" out there that is not being used by
anybody. The ramifications of the insight are significant. It suggests
that while spectrum *scarcity* is a problem in some bands some of the
time, the larger problem is spectrum *access* -- how to get to and use
those many areas of the spectrum that are either underutilized or not
used at all.

One way the Commission can take advantage of this white space is by
facilitating access in the time dimension. Since the beginning of
spectrum policy, the government has "parceled" this resource in
frequency and in space. We permitted use in a particular band over a
particular geographic region often with an expectation of perpetual use.
Like Einstein who dramatically theorized on the importance of the time
dimension almost 90 years ago, the Commission now should also look at
*time* as an additional dimension for spectrum policy. How well could we
use this resource if our policies fostered access in frequency, space
and time?

Technology has, and now hopefully FCC policy will, facilitate access to
spectrum in the time dimension that will lead to more efficient use of
the spectrum resource. For example, a software defined radio may allow
licensees to dynamically "rent" certain spectrum bands when they are not
in use by other licensees. Perhaps a mobile wireless service provider
with software defined phones will lease a local business's channels
during the hours the business is closed. Similarly sensory and adaptive
devices may be able to ¨find¨ spectrum open space and utilize it until
the licensee needs those rights for their own use. In a commercial
context, secondary markets can provide a mechanism for licensees to
create and provide opportunities for new services in distinct slices of
time. By adding another meaningful dimension, spectrum policy can move
closer to facilitating consistent availability of spectrum and further
diminish the scarcity rationale for intrusive government action.

3.  [Command and Control Regulation Transitions to
    Flexibility]{.underline}

Historically the Commission often limited flexibility via command and
control regulatory restrictions on which services licensees could
provide and who could provide them. Any spectrum users that wanted to
change the power of their transmitter, the nature of their service, or
the size of an antenna had to come to the Commission to ask for
permission, wait the corresponding period of time, and only then, if
relief was granted, modify the service. Today's marketplace demands that
we provide license holders with greater flexibility to respond to
consumer wants, market realities and national needs without first having
to ask for the FCC's permission. I believe license holders should be
granted the maximum flexibility to use \-- or allow others to use \--
the spectrum, within technical constraints, to provide any services
demanded by the public. With this flexibility, service providers can be
expected to move spectrum quickly to its highest and best use.

Such flexibility should not come at the cost of clearly defined rules.
The rapid pace of the markets and technology requires the Commission to
continue to define clearly even the more expansive rights of flexible
licenses. Without clarity, there is little certainty for the consumer,
for the licensee in building business plans, or for the capital markets
as to the value of the licenses. Although our licensed services -- such
as mobile wireless services -- have thrived in the marketplace, the
Commission has not maximized the public interest benefits that could be
created by these licensees. For example, if the agency were to define
the interference temperature in the licensed service bands, it would
establish a clear watermark beyond which interference would not be
permitted to rise. This certainty and stability would protect the
investment-backed expectations of incumbents and their investors, while
opening spectrum to innovative uses under clearly specified parameters.

4.  [The Public Interest in Spectrum Policy is Now More Informed by the
    Consumer Interest]{.underline}

We need a new spectrum policy that fits a new paradigm of putting the
consuming public into the assessment of the spectrum public interest.
This does not mean that the Commission will overlook the larger public
interest goals such as national defense, public safety, and critical
infrastructure. But it does mean that we should develop policies that
avoid interference rules that are barriers to entry, that assume a
particular proponent's business model or technology, and that take the
place of marketplace or technical solutions. Such a policy must embody
what we have seen benefit the public in every other area of consumer
goods and services -- choice through competition, and limited, but
necessary, government intervention into the marketplace to protect such
interests as access to people with disabilities, public health, safety
and welfare.

Spectrum policy was once an obscure abstraction for most Americans. But
today Americans experience first hand the challenges of dropped cell
phone calls -- or limits on cable competition -- or, for the
early-adopters among us, interference on their wireless LANs. These are
no longer abstractions -- they are spectrum policy problems --
interference debates, spectrum allocation decisions, and choices between
licensed and unlicensed uses. The government must respond to these
challenges -- because the consumer impact of our failure to do so is too
great to ignore -- and the American people increasingly know it.

As do their leaders. On Capitol Hill, a number of members have expressed
interest and advanced thoughtful proposals on spectrum reform. Similarly
the Bush Administration has been an active participant in the spectrum
policy dialog. At the Department of Commerce, NTIA Administrator Nancy
Victory hosted a spectrum policy summit just this spring. Participants
representing a broad range of interests \-- government, consumers,
industry and public safety - gathered to develop innovative spectrum
policy recommendations. Many others are doing their own studies and
holding conferences on spectrum policies: the General Accounting Office;
think tanks, such as the Center for Strategic and International Studies
and the CATO Institute; and universities, including my host today, the
University of Colorado. And the Commission and the Task Force are at the
epicenter of this national dialog. I look forward to working with anyone
and everyone with good ideas on how to move spectrum policy forward.

The Task Force's work will not be merely an intellectual exercise in
creative policy. Hopefully the report, and the constructive dialogue it
will initiate, will provide the framework, or blueprint, for how we will
approach spectrum policy in the future.

That framework is not just a long term process. It provides a
significant action plan for the next quarter. In the coming months, I
will:

-   Direct the Task Force to produce its report for public release;

-   Initiate a dialog with members of Congress on what legislative steps
    will assist in developing a more effective spectrum policy approach
    for the benefit of consumers;

-   Explore ways in which the interference temperature concept,
    increased spectrum access and more flexible rights may enhance the
    public interest;

-   Strive to make more spectrum available for licensed and unlicensed
    use;

-   Recommend that the Commission at its December meeting initiate a
    Notice of Inquiry that builds on the Task Force\'s work.

V. [Conclusion]{.underline}

We are truly at a crossroads in the spectrum policy component of the
digital migration. We must make critical decisions that balance the
interests of existing spectrum users and potential new entrants to
ensure that there is every opportunity and incentive to put spectrum to
its highest and best use for the benefit of all consumers.

It is important to remember that at the end of the day, we\'re not
necessarily looking for one "right" path to our destination. There is no
one-size-fits-all model for spectrum policy. We may well find that there
are multiple approaches to the spectrum policy peak that should be
pursued in different contexts in different spectrum bands over short,
medium and long-term horizons. As with any accomplishment worth
achieving, the climb will likely be strenuous but the rewards at the
summit are immeasurable.

Thank you.