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[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]

 
                THE COMMERCIAL SPECTRUM ENHANCEMENT ACT

=======================================================================

                                HEARING

                               before the

          SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                                   on

                               H.R. 1320

                               __________

                             MARCH 25, 2003

                               __________

                           Serial No. 108-12

                               __________

       Printed for the use of the Committee on Energy and Commerce

 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house

                               __________

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                            WASHINGTON : 2003

86-057PS

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                    COMMITTEE ON ENERGY AND COMMERCE

               W.J. ``BILLY'' TAUZIN, Louisiana, Chairman

MICHAEL BILIRAKIS, Florida           JOHN D. DINGELL, Michigan
JOE BARTON, Texas                      Ranking Member
FRED UPTON, Michigan                 HENRY A. WAXMAN, California
CLIFF STEARNS, Florida               EDWARD J. MARKEY, Massachusetts
PAUL E. GILLMOR, Ohio                RALPH M. HALL, Texas
JAMES C. GREENWOOD, Pennsylvania     RICK BOUCHER, Virginia
CHRISTOPHER COX, California          EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                 FRANK PALLONE, Jr., New Jersey
RICHARD BURR, North Carolina         SHERROD BROWN, Ohio
  Vice Chairman                      BART GORDON, Tennessee
ED WHITFIELD, Kentucky               PETER DEUTSCH, Florida
CHARLIE NORWOOD, Georgia             BOBBY L. RUSH, Illinois
BARBARA CUBIN, Wyoming               ANNA G. ESHOO, California
JOHN SHIMKUS, Illinois               BART STUPAK, Michigan
HEATHER WILSON, New Mexico           ELIOT L. ENGEL, New York
JOHN B. SHADEGG, Arizona             ALBERT R. WYNN, Maryland
CHARLES W. ``CHIP'' PICKERING,       GENE GREEN, Texas
Mississippi                          KAREN McCARTHY, Missouri
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MICHAEL F. DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       CHRISTOPHER JOHN, Louisiana
JOSEPH R. PITTS, Pennsylvania        TOM ALLEN, Maine
MARY BONO, California                JIM DAVIS, Florida
GREG WALDEN, Oregon                  JAN SCHAKOWSKY, Illinois
LEE TERRY, Nebraska                  HILDA L. SOLIS, California
ERNIE FLETCHER, Kentucky
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
DARRELL E. ISSA, California
C.L. ``BUTCH'' OTTER, Idaho

                  David V. Marventano, Staff Director

                   James D. Barnette, General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

          Subcommittee on Telecommunications and the Internet

                     FRED UPTON, Michigan, Chairman

MICHAEL BILIRAKIS, Florida           EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas                      Ranking Member
CLIFF STEARNS, Florida               BOBBY L. RUSH, Illinois
  Vice Chairman                      KAREN McCARTHY, Missouri
PAUL E. GILLMOR, Ohio                MICHAEL F. DOYLE, Pennsylvania
CHRISTOPHER COX, California          JIM DAVIS, Florida
NATHAN DEAL, Georgia                 RICK BOUCHER, Virginia
ED WHITFIELD, Kentucky               EDOLPHUS TOWNS, New York
BARBARA CUBIN, Wyoming               BART GORDON, Tennessee
JOHN SHIMKUS, Illinois               PETER DEUTSCH, Florida
HEATHER WILSON, New Mexico           ANNA G. ESHOO, California
CHARLES W. ``CHIP'' PICKERING,       BART STUPAK, Michigan
Mississippi                          ELIOT L. ENGEL, New York
VITO FOSSELLA, New York              ALBERT R. WYNN, Maryland
CHARLES F. BASS, New Hampshire       GENE GREEN, Texas
MARY BONO, California                JOHN D. DINGELL, Michigan,
GREG WALDEN, Oregon                    (Ex Officio)
LEE TERRY, Nebraska
W.J. ``BILLY'' TAUZIN, Louisiana
  (Ex Officio)

                                  (ii)

                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Berry, Steven K., Senior Vice President for Government 
      Affairs, Cellular Telecommunications Industry Association..    23
    Grossman, Lawrence K., Co-Chair, Digital Promise Project.....    28
    Price, Steven, Deputy Assistant Secretary for Spectrum, 
      Space, Sensors, and C3 Policy, Department of Defense.......    16
    Victory, Nancy J., Assistant Secretary, National 
      Telecommunications and Information Administration..........    10

                                 (iii)

  

                THE COMMERCIAL SPECTRUM ENHANCEMENT ACT

                              ----------                              

                        TUESDAY, MARCH 25, 2003

                  House of Representatives,
                  Committee on Energy and Commerce,
       Subcommittee on Telecommunications and the Internet,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2 p.m., in 
room 2123, Rayburn House Office Building, Hon. Fred Upton 
(chairman) presiding.
    Members present: Representatives Upton, Stearns, Cubin, 
Shimkus, Walden, Terry, Markey, Davis, Towns, Stupak, Wynn, 
Green, and Dingell (ex officio).
    Staff present: Howard Waltzman, majority counsel; Will 
Nordwind, majority counsel; Hollyn Kidd, legislative clerk; and 
Gregg Rothschid, minority counsel.
    Mr. Upton. Good afternoon, everyone. The subcommittee will 
come to order. Without objection, the subcommittee will proceed 
pursuant to Committee Rule 4E. Without objection, so ordered. 
The Chair recognizes himself for an opening statement.
    Today's hearing is on H.R. 1320, bipartisan legislation 
called the Commercial Spectrum Enhancement Act, otherwise known 
as the Spectrum Relocation Trust Fund Bill. I introduced this 
legislation which has been cosponsored by Ed Towns, Chairman 
Tauzin, Rick Boucher, Lee Terry, Gene Green, Cliff Stearns, 
Charlie Bass, Chip Pickering, Ed Whitfield, and Mark Kirk.
    Lately the subcommittee has been focused on the ailing 
telecommunications sector. Clearly the commercial wireless 
industry has not been spared from the wreckage and we have been 
searching for ways to restore some hope.
    In my view, what we need to do is to get new valuable 
spectrum into the hands of the commercial wireless carriers so 
they can bring new advanced wireless services to the consumer. 
This would be good for the wireless carriers, good for the 
equipment manufacturers, good for the consumer, and terrific 
for the economy.
    The current context the Government already has identified, 
1710 to 1755 MHz for relocation from the Government to the 
private sector. That sector, mostly encumbered by the 
Department of Defense, is considered valuable beach front 
property due to suitability for commercial, mobile advanced 
wireless services like 3G.
    All the while, H.R. 1320 provides tight fiscal controls and 
congressional oversight of the use of the spectrum relocation 
trust funds by providing that none of the money may be 
transferred from the trust fund to an affected agency until 30 
days after OMB has submitted a report to the House and 
Commerce, as well as the Appropriation Committees and the 
Senate Commerce and Appropriation Committees.
    In addition, the NTIA is required to report annually about 
the progress being made in adhering to the relocation time 
lines and relocation costs. Finally, the bill exempts the 
Telecommunications Development Fund, TDF, from the Federal 
Credit Reform Act, the practical application of which has 
prevented TDF from making loans without first attaining budget 
authority on an annual basis.
    The nature of 1320 will significantly enhance the TDF's 
ability to make loans to rural new development projects focused 
on rural and under-served areas.
    I appreciate my good friend Mr. Towns for his attention to 
that issue and I am pleased that that provision was 
incorporated into this bill.
    As such, the bipartisan bill represents and win/win/win. 
This is good news for the private sector which craves certainty 
in the process and the consumer will praise the benefits which 
new services enabled by additional spectrum will afford them.
    This is good for the Government agencies who know that they 
will be made whole when they relocate to comparable spectrum 
and the taxpayer who will not have to pay a dime to relocate 
Government agencies and will know that there is tight fiscal 
oversight in that regard.
    As indicated above, all of this is great news for the 
economy. I look forward to hearing from today's witnesses and 
working with my colleagues to expeditiously move this 
legislation through the subcommittee and beyond. Right now I 
must say that I am going to be talking with Chairman Tauzin 
later today. I am looking to hopefully perhaps mark this up in 
the subcommittee the week of April 7.
    At this point, I yield to my friend and colleague, the 
gentleman from Massachusetts for an opening statement, Mr. 
Markey.
    Mr. Markey. Thank you, Mr. Chairman. I want to commend you 
for calling this hearing today exploring ways to accelerate the 
process for reallocating Federal users where spectrum is a very 
timely endeavor.
    In addition, I believe that examining how FCC spectrum 
auction revenue is utilized after auctions occur is a vital 
public policy goal. We need to ensure that the money raised is 
spent wisely with adequate oversight. I suggest that surplus 
funds should be reinvested to maximize our Nation's 
competitiveness and to strengthen our democracy and our 
security.
    Chairman Upton has recently introduced legislation that 
seeks to advance Federal user relocation. The Upton bill 
proposes a trust fund derived from auction revenue to pay the 
military and other Federal users for moving out particular 
bands. I have introduced similar wireless legislation that 
shares much common ground with the Upton approach.
    I look forward to working with Chairman Upton as well as 
with Chairman Tauzin, Ranking Member Dingell, and other 
committee colleagues on fashioning a consensus approach to 
these issues.
    The legislation I reintroduced last week, the Spectrum 
Commons and Digital Dividends Act, has as its purpose the 
advancement of three key policy goals: (1) Establishment of a 
Spectrum Commons composed of unlicensed bands of frequencies to 
be made generally available to the public; (2) creation of the 
trust fund of up to $5 billion to assist in reallocating 
Federal users to other bands; and (3) establishment of a 
permanent public trust telecommunications trust fund from 
additional auction revenue to fund education technology grants.
    I believe that the Congress and the Administration should 
work together to promote economic growth in the high tech 
sector. Certainly the existing wireless industry is posed to 
introduce new services and could contribute to future economic 
growth and job creation.
    Moreover, high tech manufacturers, entrepreneurs, and the 
proverbial kid in the garage could make more robust use of 
wireless communications if sufficient spectrum were available 
in unlicensed form for the general public. Many of such 
entrepreneurs have given innovation in recent months with Y5 
technology and we rated unlicensed applications.
    As we push to make available for licenses for wireless 
companies, we should also support making more spectrum 
available for unlicensed use for the general public. It will 
enhance economic growth and entrepreneurial activity to have 
additional wireless platforms for innovation and wireless 
experimentation.
    In addition, we believe that when the FCC does decide to 
proceed with auctions as a means of granting licenses for use 
of the public's airways, the public deserves to reap the 
benefits of the sale of licenses to its airways. These benefits 
should not only manifest themselves in the offering of new 
commercial services or the temporary infusion of cash into the 
Federal treasury as under current law.
    I have proposed that the public should also enjoy the 
dividends that can be reaped by reinvesting money raised into a 
digital dividends trust fund. This fund will generate interest 
and that interest could be used in the form of grants to 
promote educational technology projects, software R&D, teacher 
training, and digitizing for online access to the important 
cultural assets held in our Nation's libraries and museums 
among other initiatives.
    Investing surplus auction revenues in this manner is a wise 
investment. It supports the educational infrastructure of our 
country. It will help to better prepare our citizens for an 
information rich knowledge-based economy. An educated citizenry 
is indispensable to our democracy. Educating citizens so they 
possess the necessary skill set in the digital area will make 
us a more secure and more productive country.
    This is not something that we should put off or postpone. 
Even in the midst of our country's most perilous moment during 
the American Civil War, Abraham Lincoln signed into law the 
Land Grant College legislation which spoke to a brighter, more 
hopeful future for the country.
    The legislative initiative before this subcommittee has an 
opportunity to support our military, promote wireless 
innovation, and invest in educational technology 
simultaneously. I encourage the committee not to miss this 
opportunity to act on all three agendas.
    Mr. Chairman, I thank you for this very important hearing.
    Mr. Upton. Thank you, Mr. Markey.
    Mr. Shimkus.
    Mr. Shimkus. Mr. Chairman, I will defer my opening 
statement.
    Mr. Upton. Ms. Cubin.
    Ms. Cubin. I submit my opening statement for the record.
    Mr. Upton. Without objection, all member statements in 
their entirety will be included as part of the record.
    Mr. Terry.
    Mr. Terry. Defer.
    Mr. Upton. Mr. Stearns.
    Mr. Stearns. Thank you, Mr. Chairman, for holding this 
hearing. I have an opening statement. As a cosponsor of this 
legislation, I fully support this approach toward relocation 
costs and the certainty it provides for both the industry and 
the Department of Defense.
    I commend your work and I also commend the NTIA, the FCC, 
and DOD, along with the private sector in working together as 
Ms. Victory has pointed out. She coined an expression ``one 
spectrum team.'' I also want to highlight what I believe to be 
a key statement in Mr. Price's testimony, which is that 
spectrum is core enabler. While the word enabler is used 
primarily in the defense world, it is no less applicable to our 
commercial world. Spectrum, or rather the efficient use and 
management of spectrum, enables our industry, our economy to 
continue to benefit from technological advances and delivery of 
services that consumers demand.
    I might add other nations are working incredibly hard to 
challenge the U.S. in just those areas. Flexibility and 
efficiency are the lynch pins of spectrum reform. Having said 
that, one of the greatest arguments that underline spectrum 
policy is that of scarcity.
    Spectrum users operate under a zero sum mentality. The 
amount of spectrum used means that must less for my use. 
However, we may not have to operate under the scarcity 
arguments much longer. New technologies can transfer data with 
less bandwidth and are not fair from our reach.
    Mr. Price mentions in DARPA's work on neXt Generation 
communications to provide dynamic access based on time, 
frequency, and location. Another technology is wavelength to 
vision multiplexing. Essentially this technology allows for 
different wavelengths to transmit along a single optical fiber. 
The result is increased bandwidth and flexibility of fiber 
optic system.
    So, Mr. Chairman, I believe we are taking a good first step 
in this legislation to provide an amount of certainty to 
spectrum policy. I look forward to working with you and other 
members of the subcommittee as we continue to focus on spectrum 
management reform. Thank you, Mr. Chairman.
    Mr. Upton. Thank you, Mr. Stearns.
    Mr. Dingell.
    Mr. Dingell. Good afternoon, Mr. Chairman. Thank you for 
holding the hearing. Welcome to the panel. Mr. Chairman, I want 
to commend you for the work you have done crafting this 
legislation. I fully support the goals of the bill.
    The American consumer has benefited handsomely from recent 
advances in wireless communication services. I wish to work 
with my colleagues to make additional spectrum available so 
that consumers can benefit from the next generation of wireless 
services known as 3G.
    To accomplish that goal, Congress must replace the current 
scheme where the auction winners must pay twice, once at 
auction and then again to move the Government users with a 
sustainable, predictable funding mechanism to facilitate the 
movement of Government spectrum users to new spectrum bands.
    While making this change we must also ensure with the 
ability of our armed forces to protect the security of the 
United States is not harmed in anyway. I am concerned, however, 
that the legislation proves to lack sufficient accountability 
and sufficient congressional oversight over how the proceeds 
will be deposited in the trust fund and then how they will be 
expended.
    Under this legislation once the auction proceeds from the 
sale of an agency's spectrum are deposited in the trust fund, 
they are really then appropriated and may be spent. Spending is 
subject only to an accounting of costs by the Office of 
Management and Budget and the National Technology and 
Information Administration and a brief 30-day notification 
period for the relevant committees of the Congress.
    Indeed, other than any report detailing the cost incurred 
in Government users a 30-day notice of this committee and the 
appropriators will receive is the only nod toward congressional 
resettlement in this bill. I believe as the hearing goes 
forward we will see some of the things that need to be looked 
at by the Congress but possibly, or probably, will not under 
the legislation.
    Unfortunately, Mr. Chairman, it is my experience with 
Government agencies, and particularly with the Department of 
Defense, that indicates a bit more oversight is necessary here 
to ensure scare Federal dollars are being spent wisely and in a 
manner that is consistent with what the Congress intended.
    Indeed, this committee passed oversight investigation have 
found many examples of wasteful spending by agencies, 
particularly the Department of Defense. I would also like to 
see if that is possible assuming that the auctions generate 
sufficient revenues to create a second trust fund with the 
proceeds devoted to improving the technological abilities of 
those schools and our teachers.
    The quality of this Nation's schools and their ability to 
ready students for the information economy of the 21st century 
is essential to our country's security and its economic future 
as anything else we will examine this year. I know that Mr. 
Grossman is here to discuss this very issue and I look forward 
to receiving his testimony.
    Mr. Chairman, your bill is a fine starting point. I look 
forward to working with you to improve it. In particular, to 
ensure that the Congress is able to fulfill its institutional 
responsibility to make certain Federal dollars are property 
accounted for. I believe we can resolve these concerns and work 
together to enact this important consumer bill.
    Mr. Chairman, I thank you for your recognition and I yield 
back the balance of my time.
    Mr. Upton. Thank you.
    Mr. Walden. Mr. Towns.
    Mr. Towns. Thank you very much, Mr. Chairman. Let me begin 
by first thanking you for holding this hearing. In order for 
the American carriers to compete with foreign rivals, they need 
specific bands of spectrum. The great thing about this, Mr. 
Chairman, they are willing to pay for it.
    In a time when even industry comes to the Government simply 
looking for a handout, this is the time many of them coming 
looking for a handout, it is heartening to know that we are 
trying to pass legislation that does something beneficial for 
business and, at the same time, make it easier on the American 
taxpayer at the same time.
    Another important provision of this bill, Mr. Chairman, is 
the Telecommunication Development Fund. The language in H.R. 
1320 will allow the TDF to extend loans to startup technology 
and telecom companies in rural and under-served areas across 
the country without being held to the standards of the Fair 
Credit Reform Act.
    I would like to thank you, Mr. Chairman, and also Ms. 
Wilson from New Mexico, for working with me to correct a 
drafting oversight stemming from the original language in the 
1996 Telecommunications Act. Not only would this be a boom to 
small business, but would also spare innovation and investment. 
Both are desperately needed.
    I know that Ms. Wilson has seen the benefits of the TDF in 
her own district and with this correction more entrepreneurs 
can benefit as well. This is long overdue. There are those that 
will criticize this effort as being too narrow in scope and 
that there is not enough oversight on the monies that are going 
to be given to the new trust fund.
    I will go on record as stating that I am open and willing 
to work with all of my colleagues to improve this bill when 
possible and want to ease the concerns of my colleagues as 
well.
    Mr. Chairman, we need to ensure that not only can our 
wireless carriers compete in the global marketplace by rolling 
out advance services, but we also need to ensure that the 
Department of Defense has adequate levels of spectrum to keep 
our whole land safe and to operate in times of peace and in 
war.
    Once again, I look forward to the testimony of the 
witnesses and I look forward to working with you, Mr. Chairman, 
and anybody else who feels that we can strengthen this bill. On 
that note, I yield back.
    Mr. Upton. Thank you.
    Mr. Stupak.
    Mr. Stupak. Thank you, Mr. Chairman, and thanks for holding 
this hearing. The attempt to free up spectrum for commercial 
entities to provide advanced technology such as 3G has been 
something that has created much debate and even more 
uncertainty. I am pleased that this subcommittee is working 
toward addressing this issue and that the chairman has 
generated a proposal to create more certainty for all parties 
involved to facilitate the process.
    I think there are many important issues that need to be 
discussed in relation with this subject. The current situation 
in Iraq with our troops ever more in harm's way truly brings 
home how important it is that we protect the ability of the 
Department of Defense to secure its spectrum needs.
    It appears that it will be possible to do that while 
providing commercial entities with more certainty as to the 
cost that they will incur in acquiring the needed spectrum at a 
more defined timeframe. I am supportive of these goals.
    However, I do think some additional discussion would be 
useful. Should additional parties such as the Congressional 
Budget Office also be involved in the relocation cost estimate? 
Should Congress have more oversight over use of the auction 
funds that go to pay the relocation costs? Should a trust fund 
be established so that rather than depositing extra revenues 
received from the auction above the relocation cost into the 
general treasury, such funds are allocated through specific 
priorities, such as assisting public safety?
    I believe that alternative technologies such as wireless 
offer a promising future to bring advanced technologies to 
rural and remote areas of the country such as my district. I 
look forward to hearing from the witnesses today in discussing 
H.R. 1320 and other proposals to promote this goal.
    With that, Mr. Chairman, I will yield back the balance of 
my time.
    Mr. Upton. Thank you.
    Mr. Davis. Mr. Davis defers. Okay. That concludes the 
opening statements from the members on the subcommittee.
    [Additional statements submitted for the record follow:]
    Prepared Statement of Hon. Paul E. Gillmor, a Representative in 
                    Congress from the State of Ohio
    I thank the Chairman for the opportunity to examine current 
spectrum management policies; specifically concerning advanced wireless 
technologies and their potential impacts on spectrum demand and 
allocation.
    After reviewing H.R. 1320, the Commercial Spectrum Enhancement Act, 
I applaud Chairman Upton's initiative to create a Spectrum Relocation 
Fund (SRF) that would finance the repositioning of federal government 
spectrum operations that are transferred to a different frequency band.
    In particular, I am pleased that this proposal aims to provide 
potential auction participants with greater certainty regarding the 
cost and timeliness of spectrum relocation, essentially accelerating 
commercial availability of additional spectrum for companies to deploy 
third-generation mobile telephony services to consumers.
    Current law has resulted in less assurance, as potential licensees 
pay once to win an auction, and again to negotiate with, and pay for a 
respective government agency's spectrum relocation. Such an environment 
affords prospective buyers little incentive for not only future 
participation, but investment.
    That being said, I welcome the well-represented panel, and look 
forward to hearing your testimony further touching upon current law, 
oversight issues concerning participating entities, and fiscal 
disciplines within the Committee's proposed legislative solution.
    Again, I thank the Chairman and yield back the remainder of my 
time.
                                 ______
                                 
Prepared Statement of Hon. Barbara Cubin, a Representative in Congress 
                       from the State of Wyoming
    Thank you, Mr. Chairman.
    I would like to thank you all for coming Today to share your views 
with the Subcommittee on H.R. 1320, the Commercial Spectrum Enhancement 
Act. We clearly have a broad ``spectrum'' of knowledge represented by 
our witnesses Today and I look forward to hearing your thoughts about 
streamlining the reallocation of premium-located spectrum for the next 
generation of wireless services.
    One of the things the federal government is good at is erecting 
barriers and creating bureaucracy. This is often done under the 
auspices of the ``public good''' or ``fairness.'' Unfortunately, in 
Washington, the law of unintended consequences has a way of turning 
good ideas into dubious legislation. That being said, it's nice when an 
opportunity comes along that allows us to unwind some of the 
bureaucracy, reduce undue barriers and give the economy a shot in the 
arm. That's what I hope this bill will accomplish.
    In these times of budgetary strain, fiscal discipline is more 
important than ever before. This bill can help achieve that sort of 
discipline by fully offsetting the costs government agencies will face 
when relocating to different parts of the spectrum to make room for the 
evolution of wireless technology that will benefit all Americans. It 
will also ensure that those who bid in good faith for this spectrum 
have up-front certainty that their winning bid will result in access to 
the frequency band they are seeking. H.R. 1320 will create a mechanism 
for this migration of spectrum that observes the important role of 
federal agencies, preserves Congressional oversight, and offsets the 
cost of relocation--all while freeing-up spectrum that will allow 
companies to deploy advanced wireless solutions.
    Should this bill pass, I would expect to see improvements in the 
wireless service provided in my state of Wyoming, because in addition 
to streamlining spectrum migration, H.R. 1320 will also make technical 
corrections to the treatment of the Telecommunications Development Fund 
(TDF). This fund was designed to promote access to capital for small 
telecom businesses, stimulate technology development, and promote 
telecommunications services to underserved rural and urban areas. 
However, the law of unintended consequences has struck again by 
limiting the scope of services the TDF can provide because it has been 
mistaken as a federally backed fund, instead of a conduit of private 
capital. This bill corrects that.
    The Commercial Spectrum Enhancement Act is based on recommendations 
from President Bush. Chairman Upton has garnered a bipartisan 
endorsement for his bill. I am interested to learn if our witnesses 
Today support it as well.
    I look forward to hearing your testimony and welcome you to the 
Subcommittee.
                                 ______
                                 
 Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee 
                         on Energy and Commerce
    Mr. Chairman, thank you for convening this hearing today. I commend 
you introducing H.R. 1320, the Commercial Spectrum Enhancement Act of 
2003 and I look forward to working with you to move that bill through 
this committee and the House of Representatives.
    Congress needs to pass H.R. 1320 to facilitate the deployment of 
advanced mobile data services to consumers. Last year, the Bush 
Administration and the FCC reached a landmark decision to make the 
1710-1755 MHz band and the 2110-2155 MHz band available for so-called 
third-generation wireless use. And I commend them for reaching that 
agreement.
    However, there is one catch. Federal government agencies, 
especially the Pentagon, currently use the 1710-1755 MHz band for 
important and, often, national security-related operations. So 
relocating the government agencies from this band to an equally vibrant 
spectrum band is critical.
    But the current system for relocating government spectrum users is 
fatally flawed. Under this system, a commercial entity has to win a 
licensee at auction. And then the commercial entity has to negotiate 
with the affected agency regarding the price and the timeline for the 
agency to move its spectrum operations to another band.
    This system gives a potential auction participant no certainty 
concerning the final price tag for relocating a government spectrum 
operation and the timeline for such a move. And it gives the agency no 
real incentive to relocate its operations.
    H.R. 1320 would drastically change that dynamic. Potential auction 
bidders would have absolute certainty before they even entered an 
auction regarding how much they would have to pay to be able to utilize 
spectrum reallocated from government to non-government use. These 
bidders would also have greater certainty regarding the timeline under 
which they could begin commercial operations in the band. And affected 
government agencies would have certainty in the sense that there would 
be a trust fund that could be used for no other purposes other than to 
pay their relocation costs.
    As a result, H.R. 1320 is a huge win for consumers because it would 
put spectrum to commercial use much more quickly than the current 
process.
    I want to say a couple of things about what H.R. 1320 is not. H.R. 
1320 is not a gravy train. It is not a gravy train from which Members 
can siphon off money for one pet project or another. This money is put 
in a trust fund and separated from the general fund of the Treasury so 
that auction proceeds from auctioning spectrum currently occupied by 
government agencies can be used to relocate those agencies to different 
bands.
    Once the relocation is completed, all the proceeds, and I do mean 
all the proceeds, should go back to the Treasury. There should be no 
other mandatory-type spending created by this legislation. If Members 
have good ideas for pet projects, even technology-related pet projects, 
we should consider those issues outside of the debate about H.R. 1320 
and they should let our friends at the Appropriations Committee know 
about them so that they can find a funding source for these projects.
    Trust funds are not to be entered into lightly. We need one to 
relocate government spectrum users. We don't need one for other 
purposes.
    H.R. 1320 is also not an attempt to hamstring the Administration 
concerning how the money is spent for relocation. H.R. 1320 includes 
responsible, commonsense mechanisms to ensure that the funds for 
relocation are spent in a rationale, timely manner. Congress is not 
overstepping its boundaries in this legislation, nor is OMB or NTIA 
given too much control over how the money is spent.
    I look forward to working with Chairman Upton and the 
Administration to ensure that affected agencies have the flexibility to 
relocate their spectrum operations in a timely, cost-effective manner. 
But I also hope that no one expects Congress to hand any affected 
agency a blank check and to expect no accountability.
    Mr. Chairman, thank you again for holding this hearing and for 
introducing this important legislation. I look forward to the testimony 
of our witnesses.
                                 ______
                                 
 Prepared Statement of Hon. Eliot Engel, a Representative in Congress 
                       from the State of New York
    Mr. Chairman: Thank you and let me extend my thanks to the 
panelists for being here as well. In reviewing this proposal, two 
things came to mind: A) Good Idea B) When is the mark-up?
    I commend the chairman and my good friend, Mr. Towns, for putting 
together a sensible bill that will provide a direct revenue stream for 
agencies to move from one area of spectrum to another.
    The reality is that our present technology means we need to better 
exploit frequencies below 3 Gigahertz. For years, federal agencies were 
allocated large swaths of spectrum, which in real estate terms, was 
swamp land. Well, times change and massive geological changes occurred 
and now these agencies have a great deal of beach front property.
    However, the agencies have never been provided the resources nor 
incentives to use their spectrum more efficiently--quite frankly there 
was little need. Like I said, times change.
    The stumbling block has been cost--who pays and how. Subjecting the 
needs to replace communications satellites to the annual appropriations 
process is not certain enough. Providing a stream of funding outside 
that process, similar to the nation's transportation programs, is a 
proper and fitting solution.
    I would also like to bring up the issue of public safety spectrum. 
This Committee has discussed the issue and I know my staff and the 
Chairman's staff have discussed the issue. I believe that this one area 
of spectrum management we must move quickly to resolve.

    Mr. Upton. We welcome our panel. We will start off with 
Nancy Victory who is the Assistant Secretary for the National 
Telecommunications and Information Administration, followed by 
Mr. Stephen Price, Deputy Assistant Secretary for Spectrum, 
Space, Sensors, and C3 Policy at the Department of Defense; Mr. 
Steven Berry, Senior VP for Government Affairs at the Cellular 
Telecommunications Industry Association; Mr. Lawrence Grossman, 
Co-Chair of the Digital Promise project.
    We welcome all four of you to our panel this afternoon. I 
would make a note that your complete statements are part of the 
record and we would like to limit your remarks as we did 
ourselves to no more than 5 minutes.
    Ms. Victory, welcome.

 STATEMENTS OF NANCY J. VICTORY, ASSISTANT SECRETARY, NATIONAL 
   TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION; STEVEN 
PRICE, DEPUTY ASSISTANT SECRETARY FOR SPECTRUM, SPACE, SENSORS, 
 AND C3 POLICY, DEPARTMENT OF DEFENSE; STEVEN K. BERRY, SENIOR 
        VICE PRESIDENT FOR GOVERNMENT AFFAIRS, CELLULAR 
   TELECOMMUNICATIONS INDUSTRY ASSOCIATION; AND LAWRENCE K. 
          GROSSMAN, CO-CHAIR, DIGITAL PROMISE PROJECT

    Ms. Victory. Mr. Chairman and members of the committee, 
thank you for the opportunity to testify before you today on 
H.R. 1320, the Commercial Spectrum Enhancement Act. I very much 
appreciate the opportunity to address the important issue of 
spectrum management and specifically the proposal authorizing 
the creation of a spectrum relocation fund.
    As this committee knows, spectrum has become a critical 
asset underpinning modern defense systems, homeland security, 
public safety, everyday commerce and, of course, communications 
between friends and family. To cope with the burgeoning uses of 
spectrum and the increasing forms of beneficial wireless 
technologies and devices, we must figure out ways to better 
manage the radio spectrum.
    Managers of the spectrum  my agency, the National 
Telecommunications and Information Administration (NTIA), and 
the Federal Communications Commission (FCC)  must have the 
tools to react quickly to changes in technology and usage and 
to ensure that the allocation of the spectrum addresses the 
current need.
    I therefore enthusiastically support legislative action 
authorizing the creation of a spectrum relocation fund. Such a 
fund will streamline and shorten the process for reimbursing 
incumbent users to facilitate their relocation to new spectrum 
and thus expedite the opening of the original spectrum to new 
services and technologies. I commend you, Chairman Upton, for 
introducing H.R. 1320, which embodies a relocation fund 
mechanism. This is a significant step toward improving spectrum 
management.
    As the committee members may be aware, the President's 
fiscal year 2004 budget contains a similar initiative and the 
Administration recently re-transmitted the legislative language 
to Congress. Although there are differences in the details of 
H.R. 1320 and the Administration's proposal, they both are 
designed to streamline the mechanism for compensating incumbent 
users, while providing more certainty to private sector auction 
participants about the actual costs of accessing the spectrum 
on which they are bidding.
    Legislation establishing a relocation fund mechanism is 
sorely needed. Under existing law, Federal entities must 
negotiate directly with auction winners for the relocation 
costs. This is problematic in several ways.
    First, the negotiations required under this approach will 
be significantly time-consuming and resource-intensive, 
depleting the resources of both government incumbents and 
auction winners.
    Second, to the extent classified or secret systems must be 
relocated, full and fair negotiations between government and 
the private sector will be difficult at best.
    Third, because the negotiation process will necessarily 
take time, and cannot begin until after the auction is complete 
and the license is issued, deployment of the new service is 
likely to be delayed several years after the close of the 
auction.
    And finally, the current process leaves completely 
uncertain for potential bidders the actual costs of deploying 
their new service, not to mention leaving uncertain for 
incumbents the time in which and extent to which their costs 
will be recouped.
    I am, therefore, pleased that this committee is considering 
the necessary statutory change to authorize use of a spectrum 
relocation fund. The fund is a spectrum management tool that is 
fully consistent with the types of forward-looking mechanisms 
that NTIA and the Administration believe are necessary to 
improve our management of the radio spectrum.
    In order for a relocation fund to function effectively and 
to address the concerns with the current process, we believe it 
must be designed consistently with three overriding goals:
    First, the legislation must provide for full reimbursement 
of all reasonable expenses the incumbents incur in relocating 
to new spectrum. Such full reimbursement is not only required 
by the Strom Thurmond National Defense Authorization Act, but 
is also necessary to ensure that Federal agencies can carry out 
their critical missions.
    Toward this end, it is important that any relocation fund 
legislation fully define the costs that are eligible for 
reimbursement and that this be a comprehensive list of the 
types of costs reasonably incurred by the incumbents in 
completing the transition.
    It is also important that estimates of the costs be 
collected in advance of the auction and that the legislation 
ensure, through an auction reserve price or other mechanisms, 
that the fund will contain and preserve sufficient monies to 
cover the actual reasonable relocation costs of the incumbent 
users.
    Second, it is essential that the process by which the 
Federal agencies draw down monies from the Fund be streamlined 
and relatively rapid. As my colleague from the Department of 
Defense, Stephen Price, will elaborate, the establishment of a 
relocation fund provides little gain if the process for drawing 
down monies takes as long and is as resource intensive as the 
individual negotiations with auction winners would have been.
    Obviously, controls must be put in place to ensure 
effective money management. Providing agencies with mandatory 
spending authority for the relocation payments means that 
agencies can begin the relocation process almost as soon as the 
auction receipts are paid into a fund.
    Finally, in order to be effective, a spectrum relocation 
fund mechanism must provide certainty--for auction bidders as 
well as for the incumbents. Legislation establishing the fund 
must ensure that the entities bidding for spectrum are not 
subject to additional relocation costs for the incumbents 
beyond the amount they pay for the spectrum at auction.
    By spelling out the relocation and draw down process, a 
centralized managed fund will provide incumbents with certainty 
and predictability as well. Predictability of process also will 
permit incumbents to minimize any temporary out-of-pocket 
costs--a big concern for busy agencies with tight budgets.
    Although H.R. 1320 differs in its details from the 
Administration's proposal, the bill is generally consistent 
with these three goals. I look forward to working with the 
committee to resolve any differences between the bill and the 
Administration's proposal and to help the committee produce 
legislation embodying the most workable and beneficial 
relocation mechanism.
    Mr. Chairman and members of the committee, I thank you 
again for your leadership in bringing this issue up so early in 
the 108th Congress and for providing me with the opportunity to 
testify today. I would be happy to take your questions.
    [The prepared statement of Nancy J. Victory follows:]
    Prepared Statement of Nancy J. Victory, Assistant Secretary for 
    Communications and Information, National Telecommunications and 
           Information Administration, Department of Commerce
    Mr. Chairman and Members of the Committee, thank you for this 
opportunity to testify before you today on H.R. 1320, The Commercial 
Spectrum Enhancement Act. I am Nancy J. Victory, Assistant Secretary 
for Communications and Information at the U.S. Department of Commerce. 
Although I have previously had the honor of testifying before this 
Committee, this is the first time that I have had the opportunity to 
address the important issue of spectrum management. I very much 
appreciate the opportunity to offer the Administration's views on means 
to improve spectrum management generally and specifically on the 
proposal authorizing the creation of a spectrum relocation fund.
    Spectrum has become a critical asset underpinning modern defense 
systems, homeland security, public safety, everyday commerce and, of 
course, communications between friends and family. To cope with the 
burgeoning uses of spectrum and the increasing forms of beneficial 
wireless technologies and devices, we must figure out ways to better 
manage the radio spectrum. Managers of the spectrum--my agency, the 
National Telecommunications and Information Administration (NTIA), and 
the Federal Communications Commission (FCC)--must have the tools to 
react quickly to changes in technology and usage and to ensure that the 
allocation of the spectrum addresses the current need.
    I therefore enthusiastically support legislative action authorizing 
the creation of a spectrum relocation fund, which will streamline and 
shorten the process for reimbursing incumbent users to facilitate their 
relocation to new spectrum and thus expedite the opening of the 
original spectrum to new services and technologies. I commend Chairman 
Upton for introducing H.R. 1320, which embodies a relocation fund 
mechanism. This is a significant step towards improving spectrum 
management.
    As the Committee Members may be aware, the President's Fiscal Year 
2004 Budget contains a similar initiative and the Administration 
recently re-transmitted the legislative language to Congress. Although 
there are differences in the details of H.R. 1320 and the 
Administration's proposal, they both are designed to streamline the 
mechanism for compensating incumbent users, while providing more 
certainty to private sector auction participants about the actual costs 
of accessing the spectrum on which they are bidding. I look forward to 
working actively with the Committee as it resolves these differences 
and crafts legislation embodying the most workable and beneficial 
relocation fund mechanism.
                 i. ntia's role in spectrum management
    As you know, NTIA has the crucial responsibility for managing the 
radio communications spectrum used by the Federal government agencies 
in satisfying their missions. In this role, my agency fills thousands 
of frequency assignment requests from Federal agencies each year. As 
the tremendous demand for spectrum increases, however, NTIA must not 
only respond to frequency requests, we must also engage in planning and 
coordinating current and future spectrum use requirements among the 
agencies. Additionally, because so much of the spectrum is shared 
between the government agencies and the private sector, NTIA works 
closely with the FCC, the other co-manager of the spectrum, on overall 
spectrum management process and policies.
    NTIA's laboratory, the Institute for Telecommunication Sciences 
(ITS), located in Boulder, Colorado, supports these efforts. ITS 
performs a wide range of engineering and research activities that 
directly and indirectly affect radio spectrum utilization and 
efficiency, and that thus help to improve spectrum management and use. 
ITS is the primary telecommunications research laboratory involved in 
the development and application of radio wave propagation measurements, 
studies, and prediction modules. Many of the propagation models in use 
today, in the United States and around the world, are derived from its 
work. Through ITS, NTIA continues to improve our understanding of radio 
wave transmissions to enhance spectrum use.
    NTIA's role as manager of the Federal spectrum is especially 
important today with respect to defense, public safety, and homeland 
security. Today's military relies heavily on spectrum to accomplish 
specialized and critical missions. Indeed, information gained from 
wireless systems is a pivotal weapon in times of war. Domestic training 
on those systems and operations and protections here at home are 
critical to keeping our nation safe. It should not be surprising, then, 
that forty percent of the 280,000 Federal frequency assignments 
authorized by NTIA have been provided to the Department of Defense 
(DOD) for national security purposes. Likewise, public safety and 
homeland security are also obvious concerns to NTIA. In this regard, 
NTIA has a most important role in facilitating use of spectrum and 
ensuring network viability. Following the events of September 11, NTIA 
operated 24-hours-a-day, 7 days-a-week to fill frequency requests by 
federal agencies for law enforcement, special operations, and search 
and rescue operations at the World Trade Center and the Pentagon. We 
stand ready to do so again, if circumstances require it.
    However, NTIA's spectrum concerns are not limited to defense and 
homeland security efforts. As the advisor to the President on 
telecommunications policy, my agency also recognizes its role in 
ensuring the availability of spectrum to meet the telecommunications 
needs of U.S. industries and consumers. The wonders of wireless 
technology continue to improve all of our lives--at home, at work and 
at school. Wireless has also been a continuing area of growth and 
innovation for our economy. Spectrum must be made available so this 
growth and innovation can continue and our economic security can remain 
strong. The Department of Commerce looks forward to continuing to work 
with the FCC to evaluate asserted requirements for spectrum of both 
federal and non-federal users and to consider technology and other 
creative solutions where available. The problem, of course, is 
balancing all of these important, but competing, demands for spectrum 
when the spectrum itself is a finite resource.
               ii. recent progress in spectrum management
    Currently, there is a strong sense among virtually all 
stakeholders--government and private sector alike--that our system of 
spectrum management is in need of modernization. We must look for new 
and creative ways of managing spectrum that not only protect current 
users' systems, but are also flexible to accommodate new technologies 
that enter the market. That is why last year NTIA hosted a high-level 
two-day Spectrum Summit that brought together leaders in the spectrum 
management community with those from industry to try to figure out how 
to make the process better and more transparent. FCC Chairman Michael 
Powell, his FCC colleagues, Federal agency representatives, private 
sector wireless service providers and manufacturers, technologists, 
economists and analysts participated in the event. The purpose of the 
Summit was to explore new innovative ideas to develop and implement 
spectrum management approaches that would encourage spectrum 
efficiency; that would provide spectrum for new technologies; and that 
would improve the effectiveness of the domestic and international 
spectrum management processes. Throughout the course of the two days, 
several themes or concepts continued to be touched upon by the 
panelists. As a result of those discussions, NTIA developed several 
basic goals or principles designed to guide our actions to achieve 
improved spectrum management:
    First, the U.S. government must work together as ``One Spectrum 
Team'' in its approach to spectrum. As spectrum becomes scarcer 
domestically and globally, it becomes increasingly important to improve 
communication among the agencies engaged in spectrum management. Our 
country's spectrum needs are too important to be undermined by 
internecine squabbling between and within branches of government. As 
the head of NTIA, I have been committed to building a foundation of 
trust, collegiality and cooperation in our dealings within the Federal 
government and in our interactions with the FCC, the State Department 
and Congress. Chairman Powell at the FCC and Ambassador David Gross at 
the State Department have embraced this approach and have helped to 
develop an action plan to facilitate the efficient functioning of the 
nation's spectrum management team at home and abroad. As part of this 
plan, NTIA and the FCC recently executed a new Memorandum of 
Understanding to guide our interagency coordination. I am pleased to 
note that Janice Obuchowski, the new U.S. Ambassador to World Radio 
Conference 2003, has recently been added to this team. Ambassador 
Obuchowski has the full support of my agency in the important WRC 
preparations.
    Second, there is the need to modernize our spectrum policies so 
that they are forward-looking. A concerted effort needs to be made to 
eliminate unnecessary government micro-management of spectrum uses. 
This means taking a fresh look at legacy policies, rules, and 
restrictions to assess their ability to accommodate emerging 
technologies or spectrum needs. Current practice requires users to seek 
permission from either NTIA or the FCC before changing the services 
offered over their licensed frequencies. This process can impose time-
consuming approval processes that can engender lengthy delays. We need 
to look at policies that permit flexibility of uses and technology. 
This is essential to ensure that government does not block innovation. 
For example, NTIA has supported the FCC's proposal to allow secondary 
leasing of spectrum to third parties. We will be exploring whether and 
to what extent this could work for government users.
    Third, we must pursue policies that encourage spectrum efficiency 
and that discourage spectrum waste. NTIA has long advocated the use of 
more spectrum efficient technologies. For example, NTIA has developed--
and the Federal agencies are now implementing--a transition to 
narrowband technology to relieve congestion in the land mobile radio 
bands used by the Government. Under NTIA regulations, Federal agencies 
must convert to narrowband technology in one VHF land mobile frequency 
band by 2005 and in two others by 2008. Narrowbanding, where 
technically possible, holds great promise for increasing the number of 
channels available to all users of spectrum. We will also be examining 
other policies to encourage spectrum efficiency. In doing so, however, 
we must be mindful not to let essential reliability needs be sacrificed 
for efficiency. This is particularly important for critical 
communications, such as those for defense and public safety.
    And finally, we must develop spectrum policies that ensure the 
deployment of robust wireless networks that are prepared for the worst 
of crises and that are able to deliver the best of services to the 
government, defense and public safety communities as well as to the 
American people. Attention to national security and homeland security 
is critical. In prior years, this may not have been a primary 
consideration. In today's world, it is all too important. The wireless 
networks of today and tomorrow must be robust and capable of 
functioning well, especially under the stress and strain of an 
emergency situation. The Department of Commerce is working hard to make 
sure its policies and requirements promote such operation. We have also 
been working with particular spectrum user communities to solve 
technical challenges to such improved operations, such as with respect 
to interoperability among public safety providers.
        iii. individual spectrum management challenges continue
    Last year's Spectrum Summit was a success. But it was only the 
start. Since the Summit, NTIA has made significant progress in 
achieving its goals for more efficient and effective spectrum 
management policies that we hope will provide more opportunities and 
certainty about the path ahead. The Spectrum Summit shed light on many 
issues and it continues to guide our policymaking. However, at the same 
time that we were working to improve our spectrum management policies 
overall, we faced several immediate spectrum allocation challenges.
    Third Generation Advanced Services (3G). For NTIA, 3G posed the 
question of whether and how the federal government could make 
frequencies available for Third Generation advanced wireless services 
in the United States. With guidance from the President, the U.S. 
Department of Defense, the FCC, NTIA, and the private sector sat down 
and had honest discussions on what was doable and what was not. As a 
result of these candid discussions, NTIA and the FCC announced that an 
additional 90 MHz of spectrum would be made available to accommodate 
advanced mobile (3G) services and articulated a plan for accomplishing 
this. One of the basic premises of this plan was that the allocation 
would be technology neutral and thus the private sector could decide 
the technology that would ultimately be used. It was also imperative 
that the spectrum provided not be generation-specific, thus enabling 
the marketplace to determine whether the spectrum is going to be used 
for 2G or 3G or 4G or whatever lies ahead. I would like to note that 
one of the bands identified for 3G services, the 1710-1755 MHz band, is 
occupied with government users that are entitled to reimbursement for 
relocation expenses. The spectrum relocation fund mechanism under 
consideration would provide a critical means for facilitating the 
transition of these government users and accelerating the deployment of 
3G operations.
    Unlicensed Operations in the 5 GHz Band. Early this year, the U.S. 
Government and the private sector reached an agreement on how to make 
an additional 255 MHz of spectrum available for unlicensed use in the 5 
GHz band--resolving another complex spectrum management issue that 
posed a potential barrier to deployment of devices using the 802.11(a) 
Wi-Fi technology. For nearly a year, the players at the table could not 
agree on the technical parameters that would permit sharing between the 
new unlicensed devices and incumbent operations. Finally, government 
and industry were able to find common ground and a consensus approach--
fortunately, in time for the recent CITEL (Inter-American 
Telecommunication Commission) preparations for the World 
Radiocommunications Conference negotiations. We look forward to working 
with our colleagues in the other Western Hemisphere countries, as well 
as in countries around the world, to achieve a mobile allocation in the 
5150-5350 MHz and 5470-5725 MHz bands that is consistent with 
protecting the operations of incumbent users.
    iv. a spectrum relocation fund is a needed spectrum management 
                              improvement
    The foregoing discussion provides some indication of the spectrum 
management challenges we face and the direction in which my agency 
thinks we need to proceed in order to improve how we manage the radio 
spectrum. Passage of legislation creating a spectrum relocation fund is 
consistent with and necessary for improved spectrum management. While 
existing law provides for reimbursement for federal entities relocating 
to new spectrum to make way for new services, the current process is 
time-consuming and frought with uncertainty for both incumbents and new 
entrants.
    Existing Reimbursement Procedures. By way of background, the Strom 
Thurmond National Defense Authorization Act for Fiscal Year 1999 
provides that Federal users are entitled to reimbursement for their 
costs of relocating to accommodate non-Federal users of the spectrum. 
At the direction of the Act, NTIA in June 2002 promulgated rules 
formalizing the reimbursement procedures for new licensees to 
compensate federal agencies that relocate their operations to make 
frequency spectrum available for commercial use. Under these rules, 
auction participants are given an estimate of a Federal agency's cost 
to relocate prior to an FCC auction. Once the participant becomes a 
winning bidder at an FCC auction, the winning bidder is then required 
to negotiate with each affected Federal agency in their new license 
area and pay the agencies directly for their actual relocation costs. 
This amount that the winning bidder pays the federal agencies is thus 
separate from and in addition to the amount paid at auction for the 
spectrum.
    There are a number of problems with the current process. First, the 
negotiations required under the rules will be significantly time-
consuming and resource-intensive, depleting the resources of both 
government incumbents and auction winners. Second, to the extent 
classified or secret systems must be relocated, full and fair 
negotiations between government and the private sector will be 
difficult at best. Third, because the negotiation process will 
necessarily take time, and cannot begin until after the auction is 
complete and the license is issued, deployment of the new service is 
likely to be delayed several years after the close of the auction. And 
finally, the current process leaves completely uncertain for potential 
bidders the actual costs of deploying their new service, not to mention 
leaving uncertain for incumbents the time in which and extent to which 
their costs will be recouped.
    Many of these same concerns were recognized by commenters in NTIA's 
rulemaking proceeding to adopt the current rules. In fact, private 
sector users participating in the proceeding overwhelmingly recommended 
that auction proceeds be used to pay for expenses incurred by the 
Federal entities as a result of relocation. However, as NTIA noted when 
adopting those rules, current law requires that new non-Government 
licensees directly reimburse Federal entities for relocation costs. In 
the absence of a statutory change, auction proceeds cannot be used to 
reimburse Federal entities for relocation costs.
    A Spectrum Relocation Fund Addresses Problems with the Current 
Process. I am therefore pleased that this Committee is considering the 
necessary statutory change to authorize use of a spectrum relocation 
fund. This is a significant step forward to facilitating the transition 
by incumbents, to speeding the deployment of new technologies, and to 
providing more certainty and predictability for all involved. The fund 
is a spectrum management tool that is fully consistent with the types 
of forward-looking mechanisms that NTIA and the Administration believe 
are necessary to improve our management of the radio spectrum.
    In order for a relocation fund to function effectively and to 
address the concerns with the current process, it must be designed 
consistently with three overriding goals:
    Full reimbursement of all reasonable expenses. First, the 
legislation must provide for full reimbursement of all reasonable 
expenses the incumbents incur in relocating to new spectrum. Such full 
reimbursement is not only required by the Strom Thurmond Act, but is 
also necessary to ensure that Federal agencies can carry out their 
critical missions. Toward this end, it is important that any relocation 
fund legislation fully define the costs that are eligible for 
reimbursement and that this be a comprehensive list of the types of 
costs reasonably incurred by the incumbents in completing the 
transition. This will provide certainty and predictability for the 
incumbent users, as well as ensure that the fund can be administered 
efficiently. It is also important that estimates of the costs be 
collected in advance of the auction and that the legislation ensure, 
through an auction reserve price or other mechanisms, that the fund 
will contain and preserve sufficient monies to cover the actual 
reasonable relocation costs of the incumbent users.
    A streamlined mechanism for drawing down funds. Second, it is 
essential that the process by which the Federal agencies draw down 
monies from the Fund be streamlined and relatively rapid. The 
establishment of a relocation fund provides little gain if the process 
for drawing down monies takes as long and is as resource intensive as 
the individual negotiations with auction winners would have been. 
Obviously, controls must be put in place to ensure effective money 
management. However, to the extent such controls and review can occur 
early in the process (say at an estimate stage), certainty of 
reimbursement for government users is increased, sufficient monies 
collected from the auction can be assured, and the deployment of the 
new service can be accelerated. Providing agencies with mandatory 
spending authority for the relocation payments means that agencies can 
begin the relocation process almost as soon as the auction receipts are 
paid into a fund. A relocation fund provides a centralized process for 
providing relocation payments to the agencies, which would be managed 
by the Office of Management and Budget similar to the Y2K and Emergency 
Response Funds.
    Certainty for auction bidders and incumbents. Finally, in order to 
be effective, a spectrum relocation fund mechanism must provide 
certainty--for auction bidders as well as for the incumbents. 
Legislation establishing the fund must ensure that the entities bidding 
for spectrum are not subject to additional relocation costs for the 
incumbents beyond the amount they pay for the spectrum at auction. As a 
result, auction winners will be assured of a certainty of process 
enabling them to ascertain how relocation will occur and when they will 
gain access to the spectrum. Moreover, the fund will enable auction 
participants to be better able to formulate realistic business plans 
and help to remove unexpected roadblocks to deployment of their new 
service.
    By spelling out the relocation and draw down process, a centralized 
managed fund will provide incumbents with certainty and predictability 
as well. By understanding when and how monies will be made available, 
incumbents can be more pro-active in planning for and facilitating the 
transition. Predictability of process also will permit incumbents to 
minimize any temporary out-of-pocket costs--a big concern for busy 
agencies with tight budgets. We anticipate working closely with the 
federal agencies to identify replacement spectrum or alternative 
technologies prior to the announcement of an auction, so that cost 
estimates can be as accurate as possible.
    Although H.R. 1320 differs in its details from the Administration's 
proposal, the bill is generally consistent with these three goals. I 
look forward to working with the Committee to resolve any differences 
between the bill and the Administration's proposal and to help the 
Committee craft legislation embodying the most workable and beneficial 
relocation fund mechanism. I am sure that working together, we can 
ensure that legislation is passed that will address the concerns and 
interests of all affected parties.
    Mr. Chairman and members of the Committee, I thank you again for 
the opportunity to testify on this important spectrum management issue. 
I welcome any questions you may have for me.

    Mr. Upton. Thank you very much.

                    STATEMENT OF STEVEN PRICE

    Mr. Price. Chairman Upton and members of the subcommittee, 
I would like to thank you for holding this hearing and for 
inviting me to be with you. The Department of Defense 
appreciates that your committee is looking at spectrum issues 
and, in particular, spectrum reimbursement in the event of 
relocation.
    Especially in these times we all share the same goal, to 
ensure that our troops are uniquely prepared to fight and win 
to protect freedom-loving people throughout the world. To do 
this we need to ensure, among other things, that access to 
frequency spectrum isn't a constraint on our war fighters. 
Spectrum is the lifeblood of our military.
    During operation ``Iraqi Freedom'' the success we have been 
witnessing in our military operations is to a large extent 
attributable to our technologically advanced and superior 
systems, all of which are heavily dependent on the frequency 
spectrum.
    Without the wireless connections we would not have been 
able to pinpoint and accurately target enemy leadership, find 
and destroy enemy air defense systems, minimize friendly fire 
casualties through greater situational awareness and rely on 
networks and information like never before.
    Even though spectrum is critical to DOD's mission, our 
continued access to it has been under attack. In the past year 
DOD has been put on the defensive needing to fend off 
aggressive demands in the 3G debate, the ultra-wide band 
proceeding, the 5 GHz Y5 discussions, and many other 
situations. Despite these new requirements and the added 
workload that has resulted post 9/11, the Department of Defense 
has worked very hard to reach accommodation with commercial 
interests in these recent spectrum battles.
    I can assure you that today's leadership within the 
Pentagon is committed to ensuring the right balance is 
maintained in accommodating the economic needs of our Nation 
while preserving critical military capabilities.
    The requirements for relocation of DOD spectrum remain the 
same as we have articulated in the past and that we believe are 
well settled. We need spectrum, full reimbursement, and respect 
for DOD time lines. These are the principles that we hope any 
reimbursement trust fund bill respects.
    These are our requirements because there is a significant 
asymmetry of risk when it comes to spectrum relocation. The 
person or group that wants to change the allocation bears none 
of the risk. The incumbent, typically DOD or other Federal 
agencies, bear all the risks.
    These risks include the following:
    When will we be required to move. Will we have adequate 
time to move and implement comparable military capabilities. 
Will we get the money to move and when. Will we need to retrain 
on new equipment. Will we retrain in time to be deployed in an 
emergency should that be necessary.
    Will we be able to get host nation approvals to use their 
systems in the new frequency bands in all parts of the world 
that we might need to do. Will our allies, who brought 
inoperable systems who now must modify their systems to 
continue to interoperate as we move, also be able to do so and 
who will pay their bill. And on and on.
    Because spectrum battles are so complex for DOD, it seems 
to us that the issue of cost reimbursement should be taken off 
the table as a concern. In some ways it is easiest to solve. 
Far easier, for example, than making sure that spectrum 
relocation doesn't harm coalition interoperability or degrade 
military capabilities in time for possible combat operations.
    DOD supports the administration's trust fund legislative 
proposal. We believe that the Administration proposal will 
provide incumbent Federal entities the assurance they require, 
that they will be reimbursed for actual relocation costs.
    In our view, a trust fund must be trustworthy. It must 
ensure full and timely reimbursement of all costs incurred by 
an incumbent that is dislocated by an auction. We seek full 
reimbursement, no more and no less. Actual cost. Not our guess 
or someone else's guess. New legislation should put incumbents 
at ease regarding reimbursement so that they can focus on other 
aspects of relocation such as for DOD ensuring that military 
capabilities aren't degraded, that we can continue to 
interoperate with our allies, and that we will be ready to 
deploy whenever, wherever the Nation calls.
    If legislation that you are looking at accomplishes this, 
then we will believe it will be a major enhancement to 
efficient spectrum management. If not, if the incumbent cannot 
be assured of reimbursement for all costs associated with a 
forced move, then the legislation will do more harm than good. 
Thank you for your time.
    [The prepared statement of Steven Price follows:]
   Prepared Statement of Steven Price, Deputy Assistant Secretary of 
Defense for Spectrum, Space, Sensors and C3 Policy, U.S. Department of 
                                Defense
                              introduction
    I would like to thank the members of this committee for holding 
this hearing and for inviting me to testify before you. This is a 
timely topic for our Department of Defense and our nation. We all share 
the same goal, to ensure that our troops are uniquely prepared to fight 
and win to protect freedom-loving people throughout the world. During 
operation ``Iraqi Freedom'', the success we have been witnessing in our 
military operations is to a large extent attributable to our 
technologically advanced and superior systems, all of which are heavily 
dependent on the frequency spectrum. Without the wireless connections 
made possible by access to spectrum, we would not have been able to 
pinpoint and accurately target enemy leadership, find and destroy enemy 
air defense systems, minimize friendly fire casualties through greater 
situational awareness and rely on networks and information like never 
before. Our unfolding success on the battlefield should serve as a 
reminder to everyone on the need to secure and protect the frequency 
spectrum used by the military.
    Because access to frequency spectrum is a core enabler and a vital 
resource for the Department of Defense, we must ensure that all issues 
associated with spectrum relocation, including today's topic of 
reimbursement, are dealt with in a manner that supports that goal. 
Spectrum is one of the most critical media of modern military 
operations, and the Spectrum Relocation Fund proposal under 
consideration could be instrumental in ensuring continued access to it. 
The Spectrum Relocation Fund can establish the means for DoD operations 
to be transitioned smoothly, without interruption or degradation of our 
mission capabilities, whenever DoD operations are relocated to new 
spectrum bands to make way for commercial uses.
    The Administration retransmitted to Congress a draft bill to create 
a Spectrum Relocation Fund and to revise the reimbursement procedures 
and Congressman Upton recently reintroduced the Commercial Spectrum 
Enhancement Act. We look forward to working with the Committee in 
crafting legislation to create a Spectrum Relocation Fund. We urge the 
committee to ensure that it contains key elements that are necessary 
for it to function as designed to enhance the ability of spectrum 
auctions to advance the efficient and effective use of spectrum by 
helping to maintain the Federal Government's capability.
                     reform of spectrum management
    I believe it is difficult to view the Spectrum Relocation Fund 
proposal outside of the context of overall spectrum management reform. 
As many of you know, those who have responsibility for spectrum in the 
federal government have been working extremely hard on improving our 
spectrum management practices--and in our view should be commended for 
these efforts.
    This work was kicked off at the NTIA Spectrum Summit last spring. 
It has continued apace with the recent FCC Spectrum Task Force Report 
and the GAO's work in this area. Additionally, many in government and 
industry attended and contributed to meetings of the Center for 
Strategic & International Studies (CSIS) Commission on Spectrum 
Management. Within DoD we continue to evaluate and improve our own 
internal management structures and processes. On December 3, 2002 
Deputy Secretary of Defense Wolfowitz approved and signed DoD's 
Strategic Plan for Department of Defense Spectrum Management. This was 
a very significant step within the Pentagon, formally highlighting the 
importance of spectrum issues for DoD and setting up an internal plan 
and process to implement it. As Deputy Secretary Wolfowitz said, 
``Without assured access to the spectrum our forces will not be able to 
meet the requirements of our operational goals in the near term, 
including those that directly support the Homeland Security mission, 
nor will we be able to realize the promise of military transformation . 
. . A fundamental component of achieving the goals . . . is sound 
management of the spectrum to which DoD has access.''
    Development of spectrum efficient technologies is a key component 
of any spectrum management solution. We are moving forward in 
developing what we consider to be the cutting edge of spectrum use: 
DARPA's neXt Generation spectrum program, known as XG. XG capitalizes 
on one of the factors identified by the FCC Spectrum Task Force: access 
to spectrum is the key limiting factor in using spectrum. In other 
words, spectrum may be available but there is no way to access it. XG 
will allow the dynamic management of spectrum use by defining access 
based on the dimensions of time, frequency and location. Current 
spectrum users routinely differentiate on the basis of frequency and 
location only. Enabling spectrum users to differentiate on the basis of 
time will allow more users to access the spectrum. This will help 
change the antiquated zero-sum characteristics of current spectrum 
allocations. When XG and other technological initiatives come to 
fruition, it will allow us move from a ``use rights model'' of spectrum 
use, to a ``dynamic access model.'' This will be good for our military, 
other government users, and industry.
    These are just some of the recent and ongoing efforts in the 
spectrum management domain. I look forward to discussing these 
initiatives with the committee at an appropriate time.
                     spectrum relocation in general
    It is critical to the national security that when pursuing any 
process leading to possible relinquishment of spectrum by the 
Department of Defense, careful and serious consideration be given to 
essential national defense needs.
    There's a real tendency to think that there's no problem in 
reallocating federal government spectrum, because it has been done in 
the past--as part of OBRA 93 and BBA 97--and the military is still 
performing its missions in an exemplary manner. This notion of 
``painless reallocations'' is misguided. It is vitally important to 
ensure that DOD has the spectrum access it needs for readiness and the 
overall capability of our military. Any relocation or loss of spectrum 
that is essential to military capability costs the Nation either in 
readiness or that capability, or in lost opportunity to make other use 
of funds that now must be devoted to trying to figure out how to 
maintain the readiness or capability. Loss of needed spectrum access 
yields an increased expenditure of time, funds, and other resources to 
develop, test and implement alternative capabilities or work-arounds 
which may be less effective than what they replace. Loss of needed 
spectrum access may yield a degradation of military readiness while 
alternative capabilities are developed and compensatory training 
requirements are generated. Each time we are forced to move, we throw 
into turmoil interoperability with coalition partners, many of who have 
purchased equipment designed specifically to interoperate with ours.
    Each time we are forced to ``adjust'' training in the United States 
away from operational norms to accommodate domestic frequency 
restraints, our training realism and effectiveness suffers. The loss of 
spectrum access requires DOD to expend other resources to compensate. 
These expenditures do not advance our cause but only allow us to tread 
water. Part of the answer of why the impacts of past reallocations have 
been absorbed lies with the work of our dedicated and talented spectrum 
managers. They are capable of amazing things. For example, the 
coordination necessary to put up fighter cover over New York City on 
September 11th took only two hours. But we cannot expect miracles from 
them on a regular basis.
    In simple terms, spectrum relocations raise many issues for our 
military. Cost is an important element, but not the only one. In some 
ways, from DoD's perspective, it is the most straightforward to solve 
and therefore we commend your efforts to solve it. My goal is to take 
cost reimbursement off the table as an issue in spectrum relocation 
debates and a Spectrum Relocation Fund is one mechanism to achieve that 
goal.
                        spectrum relocation fund
    Set within this context, the Spectrum Relocation Fund has the 
potential to benefit both the Department of Defense, and other affected 
federal agencies, and commercial industries slated to use that 
spectrum.
    Current legislation (the National Telecommunications and 
Information Administration Organization Act, as amended by the National 
Defense Authorization Act FY 1999) provides that commercial users will 
pay DoD in advance for the costs of relocating operations to the 
replacement spectrum, including the costs of any modification, 
replacement or reissuance of equipment, facilities, operating manuals, 
or regulations. Thus, the successful bidder is responsible for paying 
into the General Treasury the amount of its bid and for paying 
relocating Federal entities a separate amount for relocation costs. At 
the time of auction, bidders will have available only an estimate of 
Federal entities' relocation costs. Moreover, the statutory provision 
requires negotiations between successful auction bidders and relocating 
federal entities to establish the final amount paid to relocating 
federal entities. DoD would be required to negotiate, either directly 
or indirectly, with all auction winners for repayment of relocation 
costs. During auctions, blocks of spectrum may be assigned in hundreds 
of service areas around the country. Reallocating and auctioning 
spectrum for some consumer services may involve negotiating with 
numerous license-holders in many different locations. This could 
quickly become an unwieldy, costly, time-consuming, and uncertain 
process for all parties. On the other hand, under the Administration's 
proposal, Federal Government entities are provided funds out of a fund 
drawn from a pool of auction receipts and thus would eliminate the 
requirement for these repetitive negotiations.
    The purpose of spectrum auctions is to maximize allocative 
efficiency in spectrum use. Therefore, the overriding goal of a 
Spectrum Relocation Fund must be to enhance the effective and efficient 
use and management of our nation's spectrum. In order to accomplish 
that core goal, the Spectrum Relocation Fund must provide for full and 
timely reimbursement for all costs associated with relocating military 
systems to comparable spectrum bands. A well-designed Spectrum 
Relocation Fund will simplify the reimbursement process and afford 
incumbent users a higher degree of predictability and certainty of 
timely receipt of all costs associated with spectrum relocations.
    New legislation should put incumbents at ease regarding 
reimbursement so that they can focus on the other aspects of 
relocation, such as, for DoD, ensuring that military capabilities are 
not degraded, that we can continue to interoperate with coalition 
partners, and that we will be able to continue to train our troops in 
realistic settings. A trustworthy Spectrum Relocation Fund will, in 
practical terms, encourage federal entities to come to spectrum 
relocation battles with less trepidation than would otherwise be the 
case. If a Spectrum Relocation Fund meets these objectives, then it 
will advance the nation's interest in efficient spectrum allocation.
    Commercial users, too, would receive benefits from greater 
efficiency associated with a Spectrum Relocation Fund that provides for 
full and timely reimbursement of displaced users. Instead of having to 
separately negotiate relocation costs with the government following the 
auction, the commercial licensees would need only to concern themselves 
with license payments and they would have certainty at the time of 
auction as to the cost of the spectrum being auctioned. No other 
transaction would be necessary. They would only need to assess their 
bid price and the cost of build out.
        dod protections in spectrum relocation fund legislation
    The Department supports the idea of a Spectrum Relocation Fund for 
Reimbursement in general and specifically supports the Administration's 
proposal, which includes protections that DoD requires in order to 
accomplish our mission, at the level of effectiveness that the American 
public expects and that our men and women in uniform deserve. Any such 
statutory change, however, must ensure that existing statutory 
protections are maintained. Section 1062(b) of the National Defense 
Authorization Act for Fiscal Year 2000, provides that ``[i]f, in order 
to make available for other use a band of frequencies of which it is a 
primary user, the Department of Defense is required to surrender use of 
such band of frequencies, the Department shall not surrender use of 
such band'' until several conditions are met. First, the NTIA must make 
available to DOD ``for its primary use, if necessary, an alternative 
band or bands of frequencies as a replacement for the band to be so 
surrendered.'' Second, the Secretaries of Defense and Commerce, and the 
Chairman of the Joint Chiefs of Staff, must jointly certify to the 
congressional armed services and commerce committees that ``such 
alternative band or bands provides comparable technical characteristics 
to restore essential military capability that will be lost as a result 
of the band of frequencies to be so surrendered.'' This certification 
takes into account whether the replacement spectrum for different DoD 
systems has suitable technical characteristics and similar regulatory 
status so that the displaced function can be performed with no 
degradation in capability.
    DoD does support a Spectrum Relocation Fund and our view is that if 
it is to work as designed, and maintain government capabilities, it 
should contain provisions for the following:
    Full reimbursement--DoD must be fully reimbursed for all relocation 
costs for a Spectrum Relocation Fund to be viable. Under the 
Administration's proposal and under H.R. 1320, an auction would be 
invalidated if the proceeds were less than 110% of the estimated 
relocation costs. This would help to prevent the government from having 
to fund relocation costs out of pocket if the auction did not attract 
bids sufficient to cover the costs of relocation. There is some risk 
inherent in the 110% threshold. It is possible that estimates of 
relocation costs may be too optimistic, resulting in a shortfall of 
funds to cover the relocation. In this situation, the auction would be 
completed before the Federal Government entity discovered that the 
estimates of relocation costs were too low. Under the Administration's 
proposal, this is dealt with by allowing reimbursement from all of the 
assets available in the fund--not just the assets available from that 
particular auction. Furthermore, the auction receipts would remain in 
the fund for a period of ten years before reverting to the general 
treasury. This is necessary because of the difficulty in accurately 
predicting relocation costs as many as five to six years in advance of 
actual payment of costs and reimbursement and the possibility that some 
costs might not be apparent until much later. Inaccurate cost estimates 
might result from flawed calculations, but they might just as easily 
stem from a change in economic circumstances that would make a 
particular good or service required for relocation more expensive for 
the government to procure. For example, a critical part, such as a 
semiconductor chip, might no longer be manufactured on a regular basis 
domestically yet, for security purposes, we might need to special order 
such a part from a domestic concern. This might significantly add to 
the costs in a way that could not have been anticipated 5 years earlier 
when the original cost estimate was made. We should not allow DoD 
capabilities to suffer due to these inherently uncertain projections. 
The reduction in risk to DoD provided by the ability to be reimbursed 
from all the assets available in the fund is a very important component 
of the Administration bill for DoD.
    Definition of Relocation Costs--A broad definition of relocation 
costs, such as the definition of relocation costs in the 
Administration's proposal and in H.R. 1320, is necessary for 
reimbursement legislation to protect our spectrum dependent national 
security systems. These costs should obviously include the modification 
or replacement of equipment. There are also some additional 
requirements that are less obvious but are still vital for a Federal 
Government entity to relocate and maintain its existing capabilities. 
These include providing for new software, training (including training 
manuals), construction, site acquisition, transaction costs, and 
outside consultants. All these bear costs to DoD--and ultimately, to 
the taxpayer.
    Any Federal entity will incur costs to complete engineering studies 
and economic analyses required to estimate relocation costs. These 
should be covered as well, along with any other reasonable expenses 
incurred in estimating relocation costs. Furthermore, if a Federal 
Government entity needs to accelerate the introduction of systems and 
equipment to relocate earlier than anticipated to accommodate an 
auction winner, the costs of doing so should also be covered.
    There may be a period of time after an auction, and before the 
Federal entity completes the relocation, when the Federal entity still 
holds a primary allocation. If sharing with the auction winner is 
required at this time, a one-time cost of modification of equipment to 
accommodate sharing would be necessary. This should also be covered.
    Sufficient Time Lines for Cost Estimates and Relocation--DoD and 
all federal entities must have sufficient time in advance of an auction 
in order to develop pre-auction cost estimates. Agencies will generally 
receive notice of an auction from the FCC after one or more allocation 
rulemakings to make the particular spectrum to be auctioned available 
and after replacement spectrum has been identified. However, it is 
important that nothing unnecessarily restricts the time between 
announcement of an auction and the time that agencies must provide cost 
estimates to the FCC.
    The timeframes to prepare for the upcoming 1710-1755 MHz auction of 
spectrum for advanced wireless services illustrate the complex and 
lengthy process that will be necessary. Intense work by Executive 
branch agencies, led by NTIA, by the Federal Communications Commission 
and by the private sector took place from the autumn of 2000 until July 
2002 to identify appropriate bands for 3G services. It was not until 
the last two months of the Viability Assessment process that 
alternative spectrum for most government systems to be relocated was 
identified. NTIA began work shortly after the July Viability Assessment 
to develop cost estimates for relocating federal agencies. The 
Department of Defense has started an intra-agency group, made up of all 
the relevant experts, including comptroller, acquisition, program, and 
spectrum offices, to develop the most reliable cost estimates possible 
by February 2004 for the auction tentatively planned for next year. 
Also prior to the auction, we anticipate that the Secretaries of 
Defense and Commerce and the Chairman of the Joint Chiefs of Staff will 
be able to make the ``comparable spectrum'' certification discussed 
above and preserved by both the Administration's proposal and HR 1320.
    DoD and all federal entities must also have sufficient time for 
relocation of equipment. These time lines should not be based simply on 
an auction schedule, but must follow the time required for DoD to move 
to identified comparable spectrum. Failure to allow sufficient time for 
DoD to move increases the risk of harming DoD capabilities. Newly 
installed systems will need to be fully tested to ensure reliability of 
operation to meet mission standards and requirements before the use of 
existing systems is terminated. Furthermore, forcing a quick relocation 
will increase costs because of procurement difficulties--having to pay 
for expensive work-arounds and modifications due to insufficient 
planning time.
    No Separate Appropriations Process--One of the concerns regarding 
current law is that the relocation payments must be appropriated before 
agencies can spend them, which could significantly delay the relocation 
process. With the Relocation Fund, the Administration and H.R. 1320 
propose providing agencies with mandatory spending authority so that 
they can begin the relocation process as soon as the auction receipts 
are paid into the Fund. In our view, specific appropriations should not 
be necessary because the authorizing legislation will make sufficiently 
clear what funds may be spent for and for what purposes for appropriate 
controls to be maintained. Estimated costs would be available well in 
advance of any expenditures from the Spectrum Relocation Fund and, 
under the Administration's proposal, if a Federal entity were to spend 
more than 110% of the estimated costs, it would be required to fully 
justify the additional costs to OMB and to report expenditures so 
approved to both the authorizing and appropriating committees.
    Protection From Harmful Interference--As you know, interference in 
radio transmissions between users can be a serious problem and can 
jeopardize DoD capabilities. Therefore, both the Administration's 
proposal and H.R. 1320 contain language calling for the FCC to 
condition licenses on compliance with rules forbidding the licensee 
from causing harmful interference with an incumbent Federal entity, 
during the relocation period. This will allow the commercial user to 
begin operations in the band before the Federal entity is entirely 
relocated out of it. At the same time, this provision would still 
provide interference protection for federal entities during the 
relocation transition.
    Exemption from Sequestration--Another useful protection for Federal 
entities in the Administration's proposal is that in the event of 
sequestration under the Balanced Budget and Emergency Deficit Act of 
1985, the Spectrum Relocation Fund would be exempt. This is necessary 
because if the Fund were to be sequestered, DoD would be unable to 
complete relocations. The resolution of the resulting logjam would 
likely be difficult and costly for all parties.
                               conclusion
    Thank you for holding this hearing to discuss the Spectrum 
Relocation Fund. The idea has great promise and could greatly enhance 
the way we manage spectrum. Removing obstacles to reallocating spectrum 
will have benefits for the government, industry and consumers. However, 
we must remember that finding appropriate comparable spectrum will 
remain a difficult task. I look forward to working with the committee 
in developing legislation that creates an effective Relocation Fund and 
ensures full protection for DoD's essential operations.

    Mr. Upton. Thank you, Mr. Price.

                  STATEMENT OF STEVEN K. BERRY

    Mr. Berry. Thank you, Mr. Chairman. Thank you for the 
opportunity to appear before you today. I am Steven Berry, 
Senior Vice President for Government Affairs of the Cellular 
Telecommunications & Internet Association (CTIA) representing 
all categories of commercial wireless telecommunications 
carriers, including cellular and personal communications 
services (PCS), manufacturers, and wireless Internet providers.
    I just returned from CTIA's Wireless 2003 Convention, and I 
am pleased to report to this committee that there is a enormous 
sense of optimism about the future of the wireless industry. 
Demand for wireless continues to grow. Wireless added more than 
12 million customers in 2002. That is 14,000 subscribers per 
hour, every hour, every day.
    We now top 141 million subscribers in the United States. 
Wireless minutes of use continue to grow even faster, 35 
percent in the year 2002. Our vibrant, competitive industry is 
putting new products and new services in the hands of the 
American consumer.
    Because of the availability of an additional 90 MHz of 
spectrum, which will be greatly facilitated by this 
legislation, the wireless industry is even more confident than 
ever that there is a pathway to growth.
    Mr. Chairman, I am here to report that the wireless 
industry fully supports H.R. 1320, the Commercial Spectrum 
Enhancement Act, and I thank all those members who are 
cosponsors and urge others to join as co-sponsors and urge 
others to join as co-sponsors.
    Its passage will significantly improve the spectrum 
management relocation and the reimbursement process. The 
current process is a black hole for both Government agencies 
and the private sector filled with uncertainty, punctuated by 
unknown costs, and bereft of predictability. The current 
process works for no one. President Bush identified that fact 
in both FY03 and FY04 budgets.
    I quote, ``The Administration proposes to streamline this 
relocation process by creating a central spectrum relocation 
fund. Auctioner seats sufficient to cover agencies' relocation 
costs would be paid into the fund and the Federal agencies 
would be reimbursed for the relocation costs out of the fund.''
    The spectrum relocation legislation balances three key 
policy objectives. First, H.R. 1320 fully funds government 
relocation providing certainty essential to DOD and to all 
Government incumbents. Second, H.R. 1320 will result in 
workable time lines for both wireless industry and government 
incumbents. Third, your bipartisan legislation, H.R. 1320, 
provides certainty and accountability in developing, and 
sticking to, relocation cost estimates and relocation time 
lines.
    Two years ago not even a March Madness bookie would have 
given you even odds that the administration and the wireless 
industry would be before you today collectively supporting 
legislation to speed the relocation process. This did not come 
by accident.
    Beginning with the previous administration and with the 
focus of this Administration the National Security Council, the 
National Economic Council, OMB, DOD, the FCC, and especially 
the Department of Commerce headed by Nancy Victory's NTIA, all 
worked long and hard to craft a winning solution.
    The proposal is a win for national security. The events of 
the past few weeks illustrate that the absolutely vital 
imperative for America's military to meet their mission goals 
and to be equipped with the most efficient, most effective 
state-of-the-art wireless capabilities. This legislation 
ensures our Nation's spectrum policies will accomplish this 
goal and fully reimburse the Department of Defense.
    The proposal is a win for the economy. Mr. Chairman, 2 
years ago the SEBAGO Group produced an economic study 
estimating that advanced wireless services could spur $500 
billion in economic growth and the creation of over 400,000 
jobs in the U.S. economy in a 10-year period. This legislation 
encourages growth, stimulates investment, and creates new jobs 
in the high tech sector.
    This proposal is a win for consumers. As the President 
observed, and as we in the wireless industry believe, the 
current relocation process is in sore need of streamlining. Let 
me offer just a few practical problems this legislation would 
solve. First, no surprises. The U.S. taxpayer gets the full 
benefits of the auction spectrum.
    The current process does not guarantee cost or a time table 
for spectrum availability up front at the very time the private 
sector is expected to determine how much to bid at auction for 
that spectrum. By the very nature this process adds 
uncertainty, time, and cost to relocation. Uncertainty lowers 
the value of the spectrum in the auction and discourages 
investment.
    Finally, certainty. Spectrum is licensed by geographic 
areas. A carrier could win a license in Arizona. Carrier B 
could win a license in Nevada. The current process offers no 
fix to the very real problem of determining which auction 
winner pays what portion of the Government relocation possibly 
involving multiple Government systems that overlap over the 
entire southwestern United States. The proposed legislation 
avoids these problems by using auction funds to pay for system-
wide relocations.
    Finally, Mr. Chairman, the wireless industry believes the 
passage of H.R. 1320 will provide opportunities for all parties 
involved. Your bipartisan relocation legislation is a solution, 
a solution that is good for our national security, good for our 
Nation's economy, and good for the American consumer. I will 
look forward to answering your questions. Thank you.
    [The prepared statement of Steven K. Berry follows:]
   Prepared Statement of Steven K. Berry, Senior Vice President for 
 Government Affairs, Cellular Telecommunications & Internet Association
    Thank you for the opportunity to appear before you today. I am 
Steven K. Berry, Senior Vice President for Government Affairs of the 
Cellular Telecommunications & Internet Association (CTIA) representing 
all categories of commercial wireless telecommunications carriers, 
including cellular and personal communications services (PCS), 
manufacturers, and wireless Internet providers.
    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.
---------------------------------------------------------------------------
    \1\ Budget of the United States Government, Fiscal Year 2003. 
Appendix, at page 241.
---------------------------------------------------------------------------
    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
---------------------------------------------------------------------------
    \2\ Spectrum Policy Task Force Report. Federal Communications 
Commission. ET Docket No. 02-135, November 2002. At page 69.
---------------------------------------------------------------------------
    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.

    Mr. Upton. Thank you very much.

               STATEMENT OF LAWRENCE K. GROSSMAN

    Mr. Grossman. Thank you, Mr. Chairman, for inviting me to 
appear before you this afternoon. I have been here before 
wearing other hats, as President of NBC News. Today I am here 
as Co-Chairman of the Digital Promise Project, the public 
interest initiative that my esteemed colleague, former FCC 
Chairman Newton Minow and I have undertaken on a pro bono 
basis.
    Mr. Minow very much regrets that his health prevents him 
from being here today, but he did ask me to commend you, Mr. 
Chairman, which I am happy to do, on behalf of both of us for 
taking the lead and facilitating the reallocation of spectrum 
from Government to commercial use.
    Also to commend Mr. Markey for his bill establishing the 
digital dividend trust fund.
    The need for this spectrum transfer is evident and has been 
addressed effectively by others. I want to speak today briefly 
on a pressing need and to propose that this committee as an 
unprecedented and very appropriate opportunity to address in 
this bill two of the Nation's greatest and very closely allied 
priorities, the defense of the Nation and the transformation of 
the Nation's education and training.
    Mr. Markey's companion legislation to yours sets up a trust 
fund to meet society's crucial educational needs. Our request 
is to take advantage of this golden opportunity to marry the 
elements of both bills in a way that is quintessential, as you 
put it, win/win/win. Transferring the spectrum for commercial 
use, helping defense, and helping education.
    We should pay for the reasonable relocation cost of the 
military and other Federal users of the spectrum. If auctions 
raise more than is necessary to cover those costs, as the 
Congressional Budget Office and the marketplace certainly 
suggest is likely, we should reinvest those spectrum revenues 
in a parallel trust fund that will help transform education and 
training for the 21st century for all sectors of our society.
    I have just come, Mr. Chairman, from speaking at a 
conference on the media and the war sponsored by the Triangle 
Institute of Strategic Studies in North Carolina. That 
conference was attended principally by special forces officers, 
mostly instructors from Fort Bragg.
    What was striking to all of us were the profound effects 
that we would see this weekend of how information technologies 
have transformed the military and the conduct of the war, and 
how a similar revolution has taken place in the ability of the 
Nation's press to keep the public informed of what is happening 
as it happens by means of computer-generated intelligence, 
simulations, portable satellite dishes, video phones, wireless 
laptops, and other such recent IT break-throughs.
    The comment was made by a number of those at the conference 
which took place at the University of North Carolina that if 
only the Nation's system of education and training could begin 
to take effective advantage of those remarkable information 
technologies as the Defense Department and the press have 
already done.
    We could transform the quality and character of American 
teaching and learning as effectively and dramatically as we 
transformed the military and the media. Setting up such a trust 
fund is one way to address the concerns that you, Mr. Chairman, 
have expressed about the use of new technologies for education.
    As Mr. Markey has suggested, in times of national crisis 
and adversity this country had the foresight to ensure that it 
will have prosperity in the future by making historic and 
transformative investments in education and training. After the 
American Revolution the Northwest Ordinance by passed by 
Congress which really began our Nation's pioneering system of 
public education by setting aside public land whose revenues 
would support that education in every new State.
    In the darkest days of the Civil War we had the Land Grant 
Colleges Act called by historian Allan Nevins, ``The most 
farsighted congressional legislation in the Nation's history.'' 
It provided for the sale of public lands to support the 
establishment of a college and university in every State making 
higher education accessible to farmers and workers and not just 
the wealthy few.
    Today that Nation's system of 105 land grant colleges 
provides the cornerstone of American higher education. It is 
creation heralded American's economic ascendancy into the 
industrial age. In the middle of WW II Congress made its third 
transform to a public investment and training education, the GI 
Bill, which sent millions of veterans to the college of their 
choice.
    The wisdom of this Nation's innovative investments in 
education in times of crisis has been borne out in each of our 
centuries. Today we stand at another time of great uncertainty 
and we also face the sweeping changes of the new information 
age.
    The citizens who are best equipped to succeed in this 
global knowledge-based economy will need to have access to 
information technology and will need to use information 
technology effectively as working and learning tools throughout 
their lives. Education and training have become the 
cornerstones of prosperity and success in the new century's 
knowledge-based economy.
    The education research and development trust fund we are 
urging you to include in your bill would do for education and 
training what the National Science Foundation does for science, 
NIH does for health, and DARPA does for national defense. It 
will support and develop innovative uses of digital 
technologies to enhance education, training, life-long 
learning, and encourage our libraries, museums, universities, 
and school systems to move into the digital age.
    It would ensure that the Nation's vast educational and 
cultural heritage museums, libraries, and universities will 
reach beyond their walls and into the home, school, and work 
place even in the poorest and most remote areas of the Nation. 
It would transform the Internet into an enriched tool for 
training, learning, and public participation. It would help 
achieve our ends in education for all citizens to remain 
competitive in the new global economy.
    It would offset the America's loss of jobs currently 
happening to workers overseas because we don't have a 
competitive national IT training infrastructure. Employers 
require skilled and professional workers. Our systems of 
education and training must provide world class skill sets in 
these areas.
    And security. Homeland security requires education and 
training as well on an as-needed basis to deal with possible 
emergencies, threats, and dangers. We have the need now for 
life-long learning as America's growing population of senior 
citizens must remain productive contributing members of 
society. Of course, our democracy itself thrives when an 
educated citizenry has access to information and the critical 
thinking skills to make informed choices.
    Finally, Mr. Chairman, let me quote two, I think, very 
profound statements. One from the famous Hart-Rudman Report on 
national security which concluded, ``Americans are living off 
the economic and security benefits of the last three 
generations investment in science and education. But we are now 
consuming capital. Our systems of basic scientific research and 
education are in serious crisis while other countries are 
redoubling their efforts.
    ``In the next quarter century,'' the Commission concluded, 
``we will likely see ourselves surpassed and a relative decline 
unless we make a conscious national commitment to maintain out 
edge. In this Commission's view, the inadequacies of our 
systems of research and education pose a greater threat to U.S. 
national security over the next quarter century than any 
conventional war that we might imagine.
    ``American national leadership must understand these 
deficiencies as threats to national security. If we do not 
invest heavily and wisely in rebuilding these two core 
strengths, research and education, American will be incapable 
of maintaining its global position long into the 21st 
century.'' For the administration under Secretary of Commerce, 
Philip Bond, said recently that, ``Advances in technology and 
knowledge generation will radically transform the very nature 
of how we grow our economy and how we compete. Our coming 
challenge is to use technology to foster change throughout the 
entire continuum of learning, both formal and informal.
    This is beyond getting computers into the schools, beyond 
getting the schools hooked up to the Internet, and beyond 
today's debate about deployment of entry-level broadband. This 
is about much bigger change--a new learning infrastructure.'' 
Thank you.
    [The prepared statement of Lawrence K. Grossman follows:]
   Prepared Statement of Lawrence K. Grossman, Co-Chairman, Digital 
                            Promise Project
    Thank you, Mr. Chairman, for inviting me to appear before you this 
afternoon. My name is Larry Grossman, and I have appeared before you 
wearing other hats, most recently as president of NBC News, and many 
years earlier as president of PBS. Today I am here as Co-Chairman of 
the Digital Promise Project, a public interest initiative that my 
esteemed colleague, former FCC chairman Newton N. Minow, and I 
undertook on a pro-bono basis for the nation's major foundations, 
Carnegie, Century, Knight, and MacArthur. Mr. Minow very much regrets 
that his health does not permit him to travel from Chicago to appear 
here today.
    Mr. Minow has asked me to commend the Chairman on behalf of both of 
us, for taking the lead in facilitating the reallocation of spectrum 
from governmental to commercial users. H.R. 1320 does it effectively 
and appropriately. The need for this action is evident and has been 
addressed by others. I want to speak today of an equally pressing need, 
and to propose that this committee has an unprecedented and unique 
opportunity to address in this bill, H.R. 1320, two of the nation's 
greatest, and very closely allied priorities--the defense of the nation 
and the transformation of the nation's education and training. Mr. 
Upton's bill creates a trust fund from auction revenues received for 
licenses for the commercial use of spectrum that Federal entities 
vacated, to reimburse them appropriately for their costs of relocating 
to new frequencies.
    Mr. Markey has companion legislation that sets up a trust fund to 
meet society's crucial educational needs. Our request is to take 
advantage of this golden opportunity to marry the elements of both 
bills in a way that is the quintessential ``win/win,'' that will 
provide a remarkable public dividend for both defense and education. We 
should pay for the reasonable relocation costs of the military and 
other federal users of the spectrum, and if auctions raise more than is 
necessary to cover those costs, we should re-invest at least some of 
those spectrum revenues into a parallel trust fund that will help 
transform education and training for the 21st century for all sectors 
of our society.
    I have just come, Mr. Chairman, from speaking at a conference on 
the war and the media, sponsored by the Triangle Institute of Strategic 
Studies in North Carolina. The conference was attended principally by 
special forces officers--mostly instructors--from Fort Bragg. What was 
striking to all of us were the profound effects that we could see this 
weekend, of how new information technologies have transformed the 
military and its conduct of the war, and how a similar revolution has 
taken place in the ability of the nation's press to keep the public 
informed of what is happening, as it happens, by means of computer 
generated intelligence, simulations, portable satellite dishes, video 
phones, lap tops, and other such recent IT breakthroughs. The comment 
was made by a number of those at the conference, that if only the 
nation's system of education and training could begin to take effective 
advantage of these information technologies, as the Defense Department 
and the press have already done, we could transform the quality and 
character of American teaching and learning as effectively as we've 
transformed the military and the media.
    Even in times of national crisis and adversity, this country has 
had the foresight to insure that it will prosper in the future by 
making historic and transformative investments in education and 
training. History gives us guidance. In the period following the 
American Revolution, Congress passed the Northwest Ordinance, which set 
aside public land whose revenues would support the creation of public 
schools in every new state. This was the genesis of the nation's 
pioneering system of pubic education.
    In 1862, during the darkest days of the Civil War, again using the 
valuable public asset of public land, Congress passed and President 
Abraham Lincoln signed the Land-Grant Colleges Act of 1862, called by 
historian Alan Nevins the most farsighted Congressional legislation in 
the nation's history. It provided for the sale of public lands to 
support the establishment of a public college and university in every 
state, so that higher education would be accessible to farmers and 
workers, not just to the wealthy few. Today, the nation's system of 105 
land-grant colleges provides the cornerstone of American higher 
education, and its creation heralded America's economic ascendancy into 
the industrial age.
    In the midst of World War II, Congress made its third 
transformative public investment in training and education. It passed, 
and President Roosevelt signed the GI Bill, which sent millions of 
veterans to the college of their choice. This landmark educational 
initiative was instrumental in helping America become the world's 
economic and political leader and its most productive society. The 
wisdom of the nation's innovative investments in education in time of 
crisis has been borne out in each century of the nation's history.
    Today, we stand at another time of great uncertainty and we also 
face the sweeping changes of the new information age. The citizens who 
are best equipped to succeed in this global, knowledge-based economy 
will need to have access to information technology, and will need to 
use information technology effectively as working and learning tools 
throughout their lives. Education and training have become the 
cornerstones of prosperity and success in the new century's knowledge-
based economy.
    The educational research and development trust fund we are urging 
you to include in H.R. 1320 would do for education and training what 
the National Science Foundation does for science, the National 
Institutes of Health do for health, and DARPA does for national 
defense. It will support and develop innovative uses of digital 
technologies that will enhance education, training, and life-long 
learning, and encourage our libraries, museums, universities, and 
school systems to move into the digital age. It would ensure that the 
nation's vast educational and cultural heritage, housed in our museums, 
libraries, and universities, will reach beyond their walls and into the 
home, school, and workplace, even in the poorest and most remote areas 
of the nation and the world. It would transform the Internet into an 
enriched tool for training, learning, and public participation.
    Following publication of our report, DO IT has been endorsed by 
virtually every major national educational organization, library group, 
and museum organization, as well as by a large roster of CEOs of 
important high tech companies.
    Earlier this year, Congress, under the leadership of Congressman 
Ralph Regula (R-OH), recognized the potential of the proposed 
educational trust, and appropriated $750,000 to the Federation of 
American Scientists (FAS) for the development of the Digital 
Opportunity Investment Trust (DOIT), which Mr. Minow and I recommended 
in our report, ``A Digital Gift to the Nation.'' Mr. Markey's bill 
calls it the Digital Dividends Trust Fund. We have similar goals. A 
substantial portion of the funds for DO IT that were just appropriated 
by Congress will complement other monies raised by FAS, in partnership 
with the Learning Federation, from industry, foundations, and other 
sources, for the development of a carefully crafted research roadmap 
that explores the opportunities for technological innovation to 
transform learning. This could form the basis for a full-fledged 
program, should such a trust fund be established in H.R. 1320.
    The Educational Trust Fund will have a direct, and critically 
needed impact on the future of American society, just as the Morrill 
Act and the GI Bill did. The Trust will provide research and innovation 
in the areas of educational technology and training, just as the NIH 
provides research and innovation for health, NSF provides research and 
innovation for science, and DARPA for defense. In this knowledge-based 
economy, we cannot afford not to have national leadership and 
coordination of research and improvement for education, training and 
information technology. The educational trust will be essential to 
American competitiveness and security in the 21st Century.

 Education: America must make a new investment to transform 
        education for all citizens if we are to remain competitive in 
        the new global knowledge economy. The leaders of the new 
        information age will be countries that have successfully 
        evolved from a manufacturing base to a knowledge base in all 
        sectors of society. This means that our education system, pre-K 
        through 16, post secondary, as well as workforce training, 
        require a transformation in teaching and learning that fully 
        integrates advanced strategies using technology and digital 
        information.
 Jobs: America is losing jobs to workers overseas because we 
        don't have a competitive, national IT training infrastructure. 
        The National Policy Association forecasts that 3.3 million US 
        IT industry jobs will go overseas in the next 15 years, costing 
        the American economy $136 billion in wages. The new global 
        knowledge-based economy requires citizens to have greater 
        skills in using information technology and higher levels of 
        complementary knowledge in reasoning, problem solving, 
        effective communication and collaboration for jobs in all 
        sectors of the economy. Employers require skilled and 
        professional workers. All of our systems of education and 
        training must provide world-class skill sets in these areas, 
        and they are not.
 Security: Homeland Security requires education and training on 
        an as needed basis to deal with possible emergencies, threats 
        and dangers. After September 11, there is an imperative for all 
        citizens to have access to and familiarity with information 
        technology so that different modes of training and vital 
        information can be imparted quickly, effectively, at any time. 
        Safe and successful evacuation procedures, emergency procedures 
        in the event of nuclear, chemical or biological threats, and 
        effective training for first-responders now depend on 
        coordinated, advanced communication technology. All citizens 
        must be able quickly and competently to understand and utilize 
        such technology.
 Life-long Learning: America must provide every opportunity for 
        our senior citizens to remain productive, contributing members 
        of society. The Social Security Administration estimates that 
        by the year 2030 more than 70 million Americans will be over 
        the age of 65--that is double the number of seniors we have 
        today. With life expectancy estimated to soon reach into the 
        90's, there will be insufficient resources to provide social 
        security and other services to seniors unless they remain self-
        supporting and self-sufficient far longer into their lives. 
        Digitization and flexible education and training through 
        technology make it possible for ``non-traditional learners'' in 
        urban and rural areas to change, adapt, extend careers, and 
        become productive citizens over a much longer period during 
        their lifetime.
 Democracy: Democracy thrives when an educated citizenry has 
        access to information and the critical thinking skills to make 
        informed choices. It is not enough simply to be connected to 
        the Internet--putting information into context must go hand in 
        hand with the availability of content. In order for Americans 
        to be well informed in a world that is globally interconnected 
        we must develop the skills to understand, order and review an 
        explosion of scientific, cultural, political and economic 
        information. Research and innovation in education are essential 
        national priorities today. Our classrooms and classroom 
        practices look fundamentally the same as they did one hundred 
        years ago; we must transform the way we teach and learn to meet 
        the needs of Democracy in the 21st Century.
What types of projects can an educational trust fund to meet these 
        needs?
 Visualization, Modeling, and Simulation would enable students 
        to learn by doing to better understand difficult or abstract 
        concepts and apply what they learn in real-world contexts.
 Virtual worlds could offer sophisticated content and 
        challenging activities that, like popular communications media, 
        are more appealing, and engage individuals for large amounts of 
        time. In the words of education Professor James Guthrie of 
        Vanderbilt University, ``Properly used, computer-assisted 
        instruction can enable students to learn more and faster . . . 
        When it [works] students benefit from interactive and online-
        linked instruction, and gifted teachers--construct creative, 
        real-world spreadsheet problems and computer simulations for 
        their classes.''
 Intelligent Tutoring Systems could assess student strengths, 
        weaknesses, and mastery of subject material; generate 
        instruction material tailored to the progress of an individual 
        student; serve as an ``expert'' in a subject matter area; and 
        use a variety of pedagogical approaches--explanations, guided 
        learning, and coaching among others.
 Large Scale Digital Libraries and Online Museums could offer a 
        mind-boggling array of multimedia information objects and 
        digital artifacts for student, teacher and scholarly use, and 
        for building engaging curricula and learning experiences. The 
        Smithsonian's ``American Memory Project,'' is already having 
        extraordinary impact in teaching our nation's history, but it 
        is only beginning to scratch the surface of what can be made 
        available to every school in the nation.
 Distributed Learning and Collaboration could provide learners 
        with unparalleled opportunities for access to courses globally 
        that integrate rich multi-media curriculum, expert instruction, 
        and peer collaboration.
 Learning management tools could help students, teachers and 
        other education professionals better manage learning 
        opportunities, assignments, and tasks, scheduling analysis of 
        student performance, interventions of teachers and other 
        education professionals, teacher parent communications, student 
        account management; and student portfolios.
    These technologies and their potential applications in education 
and training promise a significant departure from our experience with 
education technologies. To date, much of the use of technology in 
education has involved imitating or supplementing conventional 
classroom based approaches' merely putting textbooks on CD-ROM and 
lectures and syllabi on the Web. Rather than offering interaction, 
immersions, or presence, most interactivity is limited to point and 
click web page references.
    How will the educational trust (DO IT) help to overcome existing 
barriers to meeting these goals?

 It will fund much-needed research and development in the areas 
        of information technology, software design, the process of 
        cognition, learning and memory.
 It will help fund the digitization of America's libraries, 
        museums, universities and other scientific and cultural 
        repositories to preserve the foundations of American history 
        and learning and to develop the most comprehensive learning 
        experiences for the future.
 It will serve as a center for national leadership and 
        coordination among business, university and Federal initiatives 
        in these areas, which are currently operating without 
        coordination or integration. It will provide grants and 
        contracts to those in the private, for profit sector as well as 
        the nonprofit sector. At a September 2002 summit convened by 
        the Department of Commerce and Department of Education all 
        stakeholders, representatives of Education, Government, 
        Industry, Technology Companies, Libraries and Museums, as well 
        as the Department of Defense, agreed that national leadership 
        and coordination across all sectors is an essential priority to 
        making their efforts more rational and effective.
    There are many who would say that we cannot afford to take on this 
task at this time. I think we cannot afford not to. Certainly, we need 
to begin, start modestly, as we did with past great educational 
initiatives in our history, and then build through the years.
    The now famous Hart-Rudman Report on Homeland Security 
categorically states: ``Americans are living off the economic and 
security benefits of the last three generations' investment in science 
and education, but we are now consuming capital. Our systems of basic 
scientific research and education are in serious crisis, while other 
countries are redoubling their efforts. In the next quarter century, we 
will likely see ourselves surpassed, and in relative decline, unless we 
make a conscious national commitment to maintain our edge. In this 
Commission's view, the inadequacies of our systems of research and 
education pose a greater threat to U.S. national security over the next 
quarter century than any potential conventional war that we might 
imagine. American national leadership must understand these 
deficiencies as threats to national security. If we do not invest 
heavily and wisely in rebuilding these two core strengths, America will 
be incapable of maintaining its global position long into the 21st 
century.''
    And for the Administration, Undersecretary of Commerce Philip Bond 
said in a recent speech, ``. . . advances in technology and knowledge 
generation will radically transform the very nature of how we grow our 
economy and how we compete. Growth, jobs, and the competitive edge will 
go to those nations, those regions, those communities, those companies, 
and those individuals that can most quickly and most effectively 
generate, capture, manage, and apply knowledge.''
    Sec'y Bond went on to say: ``. . . Our coming challenge is to use 
technology to foster change throughout the entire continuum of 
learning, both formal and informal. This is beyond getting computers 
into the schools, beyond getting the schools hooked up to the Internet, 
and beyond today's debate about deployment of entry-level broadband. 
This is about much bigger change--a new learning infrastructure.''
    The funding support for DO IT is modeled after the Northwest 
Ordinance and the Land-Grant Colleges Act of previous centuries. It, 
too, would use revenue from public assets--the electromagnetic 
spectrum, the 21st century equivalent of the public lands of previous 
generations--for vast educational benefit to future generations of 
Americans in every state. The trust, which you could help create today, 
would use revenues from portions of the publicly-owned spectrum. A 
portion of the proceeds from the commercial exploitation of this public 
asset would be enough to endow the Educational Trust and create a great 
legacy for the nation's future.
    The Trust will serve as a kind of venture capital fund for 
educational institutions, enabling them to become true participants in 
the digital age. Great Britain, Japan, Singapore and other nations are 
already working on such initiatives, and America must not fall behind 
in this next great wave of educational progress. The strength of our 
democracy and our economic competitiveness depends on it.
    In closing, we urge you to support the creation of two trusts in 
the legislation you will report from this committee. The first rightly 
reimburses the costs to the military and other federal entities for 
moving. By creating the second Trust, this Committee will lead the way 
in transforming education and training for future generations of 
Americans.
    When we first discussed this idea with Senator Stevens, he replied, 
``I really get this. I went to a land grant college, on the GI Bill. 
This is about the next generation.'' And it is.
    I thank you for your time and would be pleased to answer any 
questions you may have.

    Mr. Upton. Thank you, Mr. Grossman. I got a little help 
from the clock there.
    I appreciate all of your testimony and, at this point, 
members will be recognized for either 5 minutes or 8 minutes if 
they deferred on their opening statements. I will recognize 
myself for 5 minutes.
    Mr. Price, appreciate you being here. In your view, and in 
the Department of Defense's view, does H.R. 1320 provide for 
full and timely reimbursement for all cost associated with 
relocating military systems to comparable spectrum bands?
    Mr. Price. Chairman Upton, that is a hard question to 
answer.
    Mr. Upton. I wanted yes.
    Mr. Price. The way the process works is that there is a 
band identified and there is some give and take. There is 
roughly a band that people want to move out of. Then there is a 
process which we went through, it took about 2 years, to 
identify comparable spectrum. Then at that time there is an 
auction set. That is sort of where we are now and the FCC is 
going through its process.
    We are going through right now cost estimates and we should 
have those by February. It will take a little less than a year 
to do the cost estimates. The problem is that we won't move for 
5 years, 6 years, 7 years after the estimate is done. Actual 
cost will end up being 5 or 6 years later. With all the 
evolution in technology, with all the issues of our legacy park 
still around it is hard to know.
    If the Department of Defense is tied to the estimate that 
was made 5 or 6 years before we actually had to move, then I 
would say no. If the legislation is structured in such a way 
that there is enough money in the trust fund and we put forward 
our cost and it is vetted by OMB and it meets the oversight 
requirements in the bill of all the detailed cost, and then the 
Department of Defense is allowed to take money out of the fund 
to meet its actual cost, then I would say the bill does 
accomplish that.
    Mr. Upton. I think in our bill 1320 it says, ``Such 
revision in deposit shall be made not later than the end of the 
fiscal year in which the NTIA has notified the Commission that 
all of the entities whose relocation costs are payable from 
such account have either (a) completed their relocation, or (b) 
been determined by the NTIA.'' It is my understand that I think 
the administration's bill they were talking about was looking 
at a 10-year stand before reverting back to the general 
treasury. My sense is that the way that we have written this 
when relocation is complete would be more satisfactory to the 
administration than, in fact, the proposal that was floated to 
us at some point before. Is that not sound reasoning?
    Mr. Price. We would have to look carefully at who the right 
decisionmaker should be, whether it should be the President, 
whether it should be NTIA. But the concept is fair that once we 
have finished the relocation, all the interference issues have 
been taken care of, and we have moved and we have given up the 
other spectrum, then we are done.
    The issue comes down to, let us say, the cost are a billion 
dollars to pick a number, and the auction raises a billion one. 
If the cost estimate was off by more than 10 percent, which is 
conceivable, then the administration's proposal is that money 
from a series of auctions goes into one trust fund and it stays 
there so that agencies would have the opportunity if we are 
over 110 percent, maybe 112 percent, to take the proceeds from 
another auction. In that case, I candidly prefer the 
Administration approach that the money is in there for 10 
years, a long period of time, not just when we are moving.
    Mr. Upton. The language that we have is when relocation is 
complete. Again, the way that we have structured this, would be 
both NTIA and Defense working together to come to that 
conclusion.
    Mr. Price. It may well be that we can live with that. We 
just had some questions which we can work with your staff on as 
to the details of when relocation is complete. How is that 
decided? There is some question about is it after testing has 
been done. Those may be details that we can reach an agreement 
and we have already had some discussions with your staff on 
these.
    Mr. Upton. Ms. Victory, how do you think that the phrase 
``when relocation is complete'' will be interpreted by NTIA?
    Ms. Victory. Well, in looking at--if I could digress for 
just a moment. In looking at the two bills, the Administration 
bill and H.R. 1320, there really are two significant areas of 
difference. They really are fairly close. Stephen mentioned 
both of them. One is with respect to whether the auction 
proceeds are deposited in separate accounts or single account.
    As he correctly mentioned, the single account approach 
gives you an additional cushion because if your estimates are 
really off in one auction and you underestimate another 
auction, you get to true it up whereas that would be difficult 
if you had separate accounts.
    The other one is with respect to sort of what is the 
process for drawing down the funds. I think, as Stephen 
correctly mentioned, it is important that be a fairly 
streamlined process to make sure that the estimates are made 
fairly close in time to when the monies are going to be drawn 
down so that your estimates are not outdated. I think that is 
very key.
    As far as your question how we would interpret when the 
relocation is complete, it is when the movement has occurred, 
when the new transmitters have been put up, and the operations 
have been switched over.
    Mr. Upton. My time has expired. Mr. Markey, I recognize 
you.
    Mr. Markey. Thank you, Mr. Chairman, very much.
    Mr. Grossman, we have two objectives. We have the 
protection of hometown and homeland security on the one hand, 
and also transforming out educational system and our economy, 
our training to prepare for and fully capture the digital 
economy opportunities that are presented.
    Can you expand on how investing in telecommunications 
initiatives and educational technology can positively impact 
our job situation, our homeland security, and our worker 
security in the United States?
    Mr. Grossman. I certainly hope so. It is clear that is a 
hugely important priority, especially at this time as the 
Rudman-Hart Commission has suggested. And as been stated over 
and over again, the need for first responders to be trained, 
the need for the population to deal with threats to their 
safety, the need for information to be spread rapidly, the need 
for education and information to be developed on how to deal 
with an anthrax threat or something new that comes up becomes 
essential.
    So the whole process, as we have done with the Defense 
Department by the Defense Department, as I suggested in my 
statement, also by the media which is doing such an amazing job 
using new information technology to bring to the American 
public what is happening so many thousands of miles away, this 
whole process of taking advantage of these new digital 
technologies, delivering them through the Internet.
    I just happened as I was coming in here, Mr. Chairman, to 
notice in the current issue of Carnegie Foundation Reporter a 
major article on the whole issue of technology and education 
where there was a survey of 90,000 Michigan teachers who showed 
that most use the Internet for work but they don't integrate 
any of it into their teaching. It is not a matter of hardware.
    It is a matter of developing the software, developing the 
models, developing the prototypes, and developing the standards 
so that can become integrated into both classroom as well as 
lifelong learning, work place training that is so critical for 
our priorities today.
    Mr. Markey. Ms. Victory, we don't know where technology and 
advances will take us. What happens when there may not be a 
future licensee or an auction of bands that the FCC wants to 
reallocate from a Federal user?
    Ms. Victory. There is a lot of spectrum out there. The 
beach front property below 3 GHz is certainly is certainly very 
crowded, but I think as we are learning all the time, 
technology is expanding the bounds of the usable spectrum. To 
the extent that Federal spectrum is fully used and effectively 
used and is not being reallocated, certainly there may be 
spectrum reallocated from certain private sector uses today or 
perhaps spectrum that currently isn't used because of the 
limitations of current technology.
    Mr. Markey. But we structured the law before the promise of 
unlicensed spectrum. Now we look at changing the laws for all 
future Federal relocation. Should we come up with a policy that 
is savvy enough to encompass new innovative unlicensed 
opportunities that may be 5 or 10 years down the road?
    Ms. Victory. Well, I don't think that unlicensed use is 
precluded by a spectrum relocation fund. This just simply 
provides a mechanism for cost recovery when an auction is used. 
Clearly with respect to the agreement that we have all been 
able to reach as a consensus U.S. position on 5 GHz and making 
255 MHz available for unlicensed, certainly the impetus and 
incentives for making unlicensed available is alive and well.
    Mr. Markey. So how do we pay Federal users if there is no 
auction?
    Ms. Victory. For unlicensed spectrum it may come from 
Federal spectrum or it may come from private sector spectrum or 
spectrum that is not yet used yet. With respect to if you make 
Government spectrum available for unlicensed use, I think that 
is going to be a challenge for the FCC and NTIA to figure out 
how to----
    Mr. Markey. Where do we get the money to pay the Federal 
user?
    Ms. Victory. That is going to be a challenge to make 
Government spectrum available for unlicensed. But what I do 
want to emphasize is there is plenty of other spectrum 
available that might be made available for unlicensed, or you 
can have a sharing situation as well to the extent that you put 
certain operational limits on the unlicensed devices sharing 
may be possible. That is one of the things we were able to work 
out in the 5 GHz band.
    Mr. Markey. Okay. Because we don't know where it is all 
heading, Mr. Chairman, and I hope we ultimately would be able 
to do this, we should just prepare from a policy perspective 
for either route that we might go down so that there is a 
mechanism in place that we can then rely upon that will be 
invoked if we hit that set of circumstances rather than leaving 
it undiscussed to some point in the future. Thank you, Mr. 
Chairman.
    Mr. Upton. Thank you, Mr. Markey.
    Mr. Shimkus is recognize for 8 minutes.
    Mr. Shimkus. Thank you, Mr. Chairman. I would to read a 
part from the committee's synopsis of the hearing and then I 
would like a response, especially from probably Mr. Price and 
Mr. Berry first.
    It says, ``Within 1 year after the Federal entity is 
relocated, if the Federal entity demonstrates to the FCC that 
the new facilities or spectrum are not comparable to those 
which was relocated, the commercial licensee must take 
reasonable steps to remedy any defects or pay the cost of 
returning the Federal entity to its original spectrum.'' Mr. 
Berry, is that your intent of this legislation? I mean, is that 
your understanding what this legislation does?
    Mr. Berry. The legislation has several enhancements to the 
Administration's original proposal that I think actually 
improve that situation. For example, it doesn't change existing 
law. All the 2000 Defense Authorization Act requirements that 
identify who gets to determine DOD has adequately moved and 
found comparable spectrum and is, in fact, operating with full 
capacity to meet military needs.
    That will continue to be done by the Secretary's staff and 
the Chairman of the Joint Chief of Staff as in current law. 
Also the way this statute, at least the way that 1320 is 
drafted, I think you will have other protections by setting 
separate trust funds for each auction. The trust fund stays in 
place until the funding is actually finished or the relocation 
is finished. The 110 percent trigger is just so that the 
auction is completed if it has gained 110 percent of the 
relocation cost.
    If it brings more than that under Mr. Upton's legislation, 
I think that you would be more than capable to utilize 
additional funds until that spectrum relocation fund is 
depleted, or until that determination is made that either you 
can or cannot fully relocate. I think there is some protections 
built in to 1320 that were actually not contemplated by the 
Administration that I think enhances DOD's position.
    Mr. Shimkus. So from the investor's side you think that 
there is enough certainty provided in this legislation without 
the aspect of the provisions I talked about, possible 
additional cost, also President's ability to reclaim spectrum 
based upon national defense interest or public safety. It 
sounds like there is less certainty than I would think that 
individuals in the corporate world who want to invest major 
sums of dollars would like. You are saying there is certainty 
in this language.
    Mr. Berry. I suggest that this legislation creates a 
greater degree of certainty and a greater degree of 
predictability than the current system by a long shot. As much 
as we need it, so does DOD and other Government users need that 
degree of certainty. I think both are enhanced in this 
legislation.
    Mr. Shimkus. Well, then turning to Mr. Price, we have gone 
through these hearings before on spectrum and, of course, 
especially within current environment the concern will be real 
world operational readiness during the transition, not just 
within the continental United States but worldwide.
    My question also is very similar. Does the language 
presented in this original draft provide the Department of 
Defense the certainty to give up an asset that they understand 
and can use operationally through a transition period of time 
to meet the unknown future requirements of operating in really 
what we perceive to be a digitized battlefield which we are 
very close to getting there.
    Mr. Berry. Right. Thank you for that question. The first 
point I make, and I have made this point to the committee 
before, we keep talking about DOD losing spectrum because that 
is what we seem to have been talking about for the past few 
years.
    I would just make the point that as the Department of 
Defense moves to network-centric operations, the Army is moving 
to a digitized battlefield, unmanned aerial vehicles, sensors 
pinpointing a lot of intelligence assets that we have seen 
deployed. Over time DOD believes we will need more spectrum, 
not less, in the U.S. for training, for testing, and possibly 
for homeland issues, as well as we deploy abroad.
    This legislation, along with the comparable spectrum 
legislation that we already work under, I believe does provide 
enough certainty in terms of timing with one exception so that 
we do have the timeframes once we know we move.
    The one concern we have is there seems in the House bill as 
it currently stands the potential and, again, we need to work 
with your staffs, that if the spectrum is identified in months 
prior to an auction and the cost estimate is due 6 months prior 
to an auction, there is the potential if it hadn't been 
identified well before then that there is only 3 months to 
identify the comparable spectrum and to do the cost estimates.
    That is a very tough challenge and that frankly could not 
be done. It is going to take us about 10 months in the 3G 
proceeding now. We will have our cost estimates done. We are 
shooting for February. The Deputy Secretary signed a note a few 
months ago. That is even after we know the comparable spectrum. 
As long as there is enough time and we do have the comparable 
spectrum, we are comfortable that we can meet our mission.
    Mr. Shimkus. Ms. Victory mentioned the transmitters, but we 
are also talking about for a movement by the Department of 
Defense also the receiver end. I mean, we are talking about 
really replacement of wholesale equipment across the board.
    Mr. Berry. Correct, sir. This wasn't our first choice. If 
someone had said would you like to move or not like to move, we 
would not like to move so this isn't a voluntary, ``Hey, here 
is some spectrum. We are going to give it back.'' But 
understanding the Administration's view is to balance economic 
need of the commercial interest with military capabilities, in 
the 3G debate we worked long and hard to reach an accommodation 
on 45 MHz.
    But it is a complex process because w are moving into bands 
where we think it will be free of interference. We are going 
through those analyses right now. It relates to the issue of 
why the cost estimates might not be perfect because some of the 
legacy systems we are already finding aren't made anymore, some 
of the parts.
    Do you reopen production lines? Do you modernize? Are we 
allowed to modernize based on what is on authorized relocation? 
It is complex business and it is also sort of an issue of first 
impressions because the Department has not been through this 
before so we don't know how accurate our cost estimate will be, 
at least the first time.
    Mr. Shimkus. Right. And I know my friends in the industry 
know I'm very supportive of cellular side, but I am also very 
supportive of our national defense and security. I am glad you 
guys have actually gone, and NTIA and Ms. Victory, have gone to 
the table to try to work out a compromise.
    I just want us, Mr. Chairman, to continue to be vigilant so 
that no one gets lost on the side of the road as we move 
probably for economic development in new services. I thank you 
for the hearing. I yield back my time.
    Mr. Upton. Thank you, Mr. Shimkus.
    Mr. Stupak.
    Mr. Stupak. Thank you, Mr. Chairman. As we have been 
discussing, it is a complex issue and I am pleased that at 
least you have a bill that gives us a starting point to begin 
these discussions. I think this is something we needed so we 
could focus on this a little bit more. Since we are on the 
subject of spectrum policy, let me ask you, Ms. Victory, this 
question.
    I would like to ask a little bit more about the spectrum 
needs of public safety agencies. I alluded to that in my 
opening statement. Public safety's need to access spectrum, 
purchase equipment, and harmonize their communications has 
become even more evident and urgent since September 11, and 
with the current budget shortfalls that we see in every State 
and the great concern that public safety agency funding will be 
cut even further, are you comfortable with the pace at which 
the process to allocate spectrum to public safety is 
proceeding?
    Ms. Victory. The public safety process is inordinately 
complex. I know the FCC does have an ongoing rulemaking to take 
a look at the 800 MHz band and perhaps make available some 
additional spectrum for public safety and make their current 
operations a little bit more efficient.
    One thing that I want to underscore is in addition to 
making spectrum available, you also have the very important 
issue of public safety interoperability. That is perhaps even 
more complex than the spectrum allocation issue, but I think it 
is very, very important if we are going to have a fully 
inoperable future for industry and Government, manufacturers, 
and State and local folks to work together to try to come up 
with a vision of what that future looks like.
    I know there is leadership within Congress on that. I also 
know that within the Administration through the PSWN groups and 
Project Safecom there are a lot of folks focusing their 
attention. I hope it moves faster as well, but I know there are 
some good folks working on it.
    Mr. Stupak. Do you believe we should address that issue, 
the public safety aspect, in this bill?
    Ms. Victory. I think that there are enough initiatives 
moving forward. I wouldn't know what to recommend to you at 
this point to put specifically in the legislation, but I do 
know the folks who should be working on it are moving along and 
I think the FCC is hoping to have a resolution on its 
proceeding shortly.
    Mr. Stupak. I know Mr. Markey has spoke of a education 
trust fund like with excess--hopefully excess revenue that may 
be released from this sale of the spectrum. Do you think public 
safety should maybe be set up along those lines and have a 
trust fund, maybe an education trust fund, maybe public safety 
trust fund? As I said earlier, all the States are cutting 
everything so drastically. I think we have 47 or 50 States 
running deficits right now.
    Ms. Victory. I think both goals are exceedingly laudable, 
but for purposes of the relocation fund, I think one of the 
most important things is to make sure first and foremost that 
the Government agencies are able to recovery their cost. To the 
extent there are any monies allocated for any other purpose, I 
think we need to complete the first order of business first 
making sure that the Government agencies are fully compensated 
for their moves.
    Mr. Stupak. Mr. Berry, did you want to add anything on 
that?
    Mr. Berry. Yes, sir.
    Mr. Stupak. You were nodding a little bit there.
    Mr. Berry. No. 1, I think, the concept of relocation fund, 
the relocation fund concept, could apply very well in the 
public safety sector mainly because you have a command control 
model. You have a dire need for maintaining the capabilities. 
You also have 24 MHz of spectrum that Congress directed that 
public safety have access to in 1995.
    Because of the lack of digital TV transition, public safety 
has not had access to over half the spectrum that they have 
been allotted. They have 47 MHz nationwide. They are sliced up 
into little drips and drabs all over the place. They don't have 
continuous--contiguous spectrum to do exactly what you said. We 
should have inoperable high tech state-of-the-art systems for 
public safety and we should act on it now to deliver that 
spectrum to the public safety.
    I think it is atrocious that we don't have that capability. 
The process right now of rebanding the 800 MGz should not 
discount the fact that Congress has already provided 24 MGz of 
utilization to the public safety--spectrum utilization for 
public safety. That should be used and used soon.
    Mr. Stupak. Thank you, Mr. Chairman, for the hearing. Maybe 
along with education trust fund, I think the issue of a public 
safety trust fund once relocation costs are assured--I'll 
repeat that--make sure relocation costs are assured would be 
something that might be valuable to explore. I look forward to 
working with you on that issue.
    Mr. Upton. Thank you, Mr. Stupak. I know Mr. Walden has a 
very important phone call that he is on. Let me just ask this 
question until he comes out. There has been a lot of discussion 
today about Mr. Markey's bill. Mr. Grossman, we appreciate your 
testimony and the work that you've done with a good number of 
folks over the years looking at this.
    I would be interested, and I don't know, Ms. Victory or Mr. 
Price, you have heard about this particular issue before. My 
sense is that you have. If somehow the Markey language was 
included as part of H.R. 1320, do you know where the 
Administration might stand with its view which includes, I 
think, a $5 billion cap on the bill. Ms. Victory?
    Ms. Victory. Let me try to address that. Certainly the goal 
of the legislation is very laudable. At this point the 
Administration does not have an official position on the bill. 
I will say that----
    Mr. Upton. On Mr. Markey's bill or----
    Ms. Victory. On Mr. Markey's bill. I will say that with 
respect to looking at the various provisions of the Markey bill 
there are two areas that give me concern. One I alluded to 
before and I think it is very important that we ensure that all 
of the costs of the Government entities are able to be 
reimbursed before any money is allocated to a different 
purpose. I think that is very important.
    The other area that jumped out at me as well, I noted that 
there was a requirement in there to allocate the 1710 to 1850 
band over for commercial use. Having just spent quite a bit of 
time trying to produce this viability assessment and plan for 
3G, certainly one of the things we concluded is that for the 
foreseeable future it just was not feasible to allocate that 
entire band for commercial service. It really would have a very 
disastrous effect on DOD's operations.
    Certainly with respect to the 3G plan that we were able to 
put together an allocate the 1710 to 1755 bands, that was 
contingent upon moving operations in that 45 MHz into the upper 
band so removing that from DOD's use and from the use of the 
other Government agencies really would threaten some of their 
critical operations.
    Mr. Upton. Mr. Price.
    Mr. Price. Again, I would echo what Nancy said, that the 
Administration doesn't have a view on your bill as of now or 
the Markey legislation. I will say that a cap, any specific 
cap, is very troublesome on its face. I'm not sure where the 
number came from. DOD is not the only Federal agency that has 
operations in the 1710 to 1755 band.
    I have heard numbers in our building bantered from $2.5 to 
$4.5 billion for our piece. It is going to take us until next 
February to do our cost estimates. This is sort of back of the 
envelopes plus other factors, so I'm not sure where any cap--I 
am not sure what the right number is. I would have no idea.
    Plus the point I made earlier that we don't feel that being 
tied to an estimate that was done 5 years before our actual 
costs is the right approach. Even if we give cost estimates we 
won't have actually gotten information. We won't have put out 
RFPs and gotten information back from our prime and other 
contractors because you can't say now, ``We want to move in 6 
years. What is the quote?'' Any cost estimate is really a 
ballpark.
    It would be very hard to do--I think to have a cap. The 
goal is not to have a windfall for any Federal agency. All we 
want is our actual costs, not more and not less. If after we 
have completed our move, another agency has, and there is 
surplus, what folks decide to do with that is more or less our 
issue and we want to make sure that our costs are reimbursed in 
a forced relocation.
    Mr. Upton. Thank you very much.
    Mr. Davis.
    Mr. Davis. No questions.
    Mr. Upton. No questions. Okay. Well, I'll keep going then.
    Mr. Price, you seemed to have expressed some concern with 
the time line in H.R. 1320 under which your agency would be 
required to provide cost estimates to the FCC. What time line 
would satisfy any of your concerns? Any or all of your 
concerns?
    Mr. Price. I haven't gone through the specific dates but if 
6 months before the auction the cost estimates are due, then it 
seems like something like 18 months before that period of time. 
If the comparable spectrum had been identified, then that would 
give us time to complete our work so that the cost estimate 
could be as accurate as it could be.
    The estimate is important because it does set the floor for 
the auction. Even though we don't necessarily want to be tied 
for our actual funds distributed to us years later, it does set 
the floor so I think that kind of timeframe makes sense.
    Mr. Upton. Okay. I think this concludes our hearing. I want 
to thank all four of you. Ms. Victory, again, I want to commend 
you for your work in working with this panel, particularly in 
your past with getting Dot Kids bipartisan legislation through 
the hurdle. We look forward to working with you with the proper 
oversight.
    Mr. Price, it has been a pleasure working with you over the 
last number of months. We are most delighted that the 
Administration is smiling at this table as we talk about this 
piece of legislation that we didn't see in the past. We 
appreciate your leadership.
    Mr. Berry, your long-time work, particularly with the 
cellular telephone industry and the importance of this issue to 
all of your members knowing that we can move into the 3G with 
the speed that we want.
    Mr. Grossman, your good work for a long, long time and 
expertise on so many different issues is most appreciated as 
well. I can assure you of that.
    With that, the hearing is adjourned.
    [Whereupon, at 3:27 p.m. the subcommittee adjourned.]
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