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S. HRG. 113–223 

STATE OF WIRELESS COMMUNICATIONS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON COMMUNICATIONS, 

TECHNOLOGY, AND THE INTERNET 

OF THE

COMMITTEE ON COMMERCE, 

SCIENCE, AND TRANSPORTATION 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

JUNE 4, 2013 

Printed for the use of the Committee on Commerce, Science, and Transportation 

( 

(II) 

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

JOHN D. ROCKEFELLER IV, West Virginia, Chairman 

BARBARA BOXER, California 

BILL NELSON, Florida 

MARIA CANTWELL, Washington 

MARK PRYOR, Arkansas 

CLAIRE MCCASKILL, Missouri 

AMY KLOBUCHAR, Minnesota 

MARK WARNER, Virginia 

MARK BEGICH, Alaska 

RICHARD BLUMENTHAL, Connecticut 

BRIAN SCHATZ, Hawaii 

WILLIAM COWAN, Massachusetts 

JOHN THUNE, South Dakota, Ranking 

ROGER F. WICKER, Mississippi 

ROY BLUNT, Missouri 

MARCO RUBIO, Florida 

KELLY AYOTTE, New Hampshire 

DEAN HELLER, Nevada 

DAN COATS, Indiana 

TIM SCOTT, South Carolina 

TED CRUZ, Texas 

DEB FISCHER, Nebraska 

RON JOHNSON, Wisconsin 

ELLEN L. DONESKI, Staff Director 

JAMES REID, Deputy Staff Director 

JOHN WILLIAMS, General Counsel 

DAVID SCHWIETERT, Republican Staff Director 

NICK ROSSI, Republican Deputy Staff Director 

REBECCA SEIDEL, Republican General Counsel and Chief Investigator 

SUBCOMMITTEE ON COMMUNICATIONS, TECHNOLOGY, 

AND THE INTERNET 

MARK PRYOR, Arkansas, Chairman 

BARBARA BOXER, California 

BILL NELSON, Florida 

MARIA CANTWELL, Washington 

FRANK R. LAUTENBERG, New Jersey 

CLAIRE MCCASKILL, Missouri 

AMY KLOBUCHAR, Minnesota 

MARK WARNER, Virginia 

MARK BEGICH, Alaska 

RICHARD BLUMENTHAL, Connecticut 

BRIAN SCHATZ, Hawaii 

WILLIAM COWAN, Massachusetts 

ROGER F. WICKER, Mississippi, Ranking 

Member 

ROY BLUNT, Missouri 

MARCO RUBIO, Florida 

KELLY AYOTTE, New Hampshire, 

DEAN HELLER, Nevada 

DAN COATS, Indiana 

TIM SCOTT, South Carolina 

TED CRUZ, Texas 

DEB FISCHER, Nebraska 

RON JOHNSON, Wisconsin 

(III) 

C O N T E N T S 

Page 

Hearing held on June 4, 2013 ................................................................................. 1 

Statement of Senator Pryor .................................................................................... 1 

Statement of Senator Wicker .................................................................................. 2 

Statement of Senator Thune ................................................................................... 57 

Statement of Senator Klobuchar ............................................................................ 59 

Statement of Senator Heller ................................................................................... 61 

Statement of Senator Warner ................................................................................. 63 

Statement of Senator Fischer ................................................................................. 65 

Statement of Senator Johnson ................................................................................ 67 

Statement of Senator Nelson .................................................................................. 69 

Statement of Senator Rubio .................................................................................... 71 

Statement of Senator Blumenthal .......................................................................... 73 

Statement of Senator Ayotte ................................................................................... 77 

WITNESSES

Steve Largent, President and CEO, CTIA—The Wireless Association® ............. 3 

Prepared statement .......................................................................................... 5 

Steven K. Berry, President and Chief Executive Officer, Competitive Carriers 

Association ............................................................................................................ 8 

Prepared statement .......................................................................................... 14 

Doug Webster, Vice President, Service Provider Routing, Mobility and Video 

Marketing, Cisco Systems, Inc. ........................................................................... 19 

Prepared statement .......................................................................................... 21 

Thomas F. Nagel, Senior Vice President, Comcast Corporation .......................... 23 

Prepared statement .......................................................................................... 25 

George S. Ford, Ph.D., Chief Economist, Phoenix Center for Advanced Legal 

and Economic Public Policy Studies ................................................................... 32 

Prepared statement .......................................................................................... 34 

Delara Derakhshani, Policy Counsel, Consumers Union ..................................... 49 

Prepared statement .......................................................................................... 51 

APPENDIX

Response to written question submitted by Hon. Amy Klobuchar to Steven 

K. Berry ................................................................................................................ 81 

(1) 

STATE OF WIRELESS COMMUNICATIONS 

TUESDAY, JUNE 4, 2013 

U.S. SENATE, SUBCOMMITTEE ON COMMUNICATIONS, TECHNOLOGY, AND

THE INTERNET, COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:32 p.m., in room 

SR–253, Russell Senate Office Building, Hon. Mark Pryor, Chairman of the Subcommittee, presiding. 

OPENING STATEMENT OF HON. MARK PRYOR, 

U.S. SENATOR FROM ARIZONA 

Senator PRYOR. I’ll go ahead and call this to order. 

I want to say welcome and good afternoon to everybody. I know 

we have a lot of people in attendance, and we understand that 

some people may be watching this on their mobile devices out in 

the hallway. 

[Laughter.] 

Senator PRYOR. But, nonetheless, we want to say thank you to 

all of our witnesses for being here. Thank you for your preparation. 

This is the third in our, ‘‘state of’’ hearings in which we’re trying 

to inform members about issues going on in the industry, but also 

hear from industry about what’s going on, not just in the industry, 

but, really, around the world, and what all the trends are. 

Wireless communication is the focus of today’s hearing. We’re 

going to hear from panelists who represent wireless providers and 

equipment manufacturers, as well as other panelists who analyze 

and monitor the industry and who advocate on behalf of wireless 

customers. 

As we all know, wireless communications are used more and 

more. If you can say there is such a thing as the ‘‘traditional cell 

phone’’—but, from traditional cell phone that many of us have relied on for the last several years, which was primarily voice communications, to now we see an increase in the use of Internet 

through wireless devices, and even things that we are beginning to 

just take for granted, these wireless devices, like garage door openers, TV remotes, Wi-Fi, Internet connectivity. These—the—licensed 

or unlicensed, this is becoming ubiquitous and ever present in today’s world. In fact, with a smartphone or tablet, someone in this 

room could have a video chat with a family member, turn on or off 

their home entertainment system, and even purchase tickets to tonight’s Washington Nationals baseball game. 

2 

I’m looking forward to hearing from our panelists. There are 

many new developments and new services that the industry is providing, and we are cognizant of that, and very appreciative of that, 

and appreciative of all the private investment that we see, and the 

many, many services that are being provided. And we, obviously, 

are concerned and we understand about the greatly increased need 

for the use of spectrum. We will all be interested to know the panelists’ thoughts on the spectrum crunch and how it can be effectively addressed as both demand and technological innovations increase. 

So, are the administration and Congress doing enough, and are 

they doing it in the right way? How can we ensure that spectrum, 

a public good, is being maximized for consumers and for businesses, and ultimately the taxpayers? The panelists before us today 

will provide their insights to these questions and many others. 

I’m pleased to be joined today by Senator Wicker, my Ranking 

Member on the Subcommittee, and also we’re going to have many, 

many of our Subcommittee Members come in and out today. This 

is a busy day on the Senate floor, so—— 

Senator Wicker. 

STATEMENT OF HON. ROGER F. WICKER, 

U.S. SENATOR FROM MISSISSIPPI 

Senator WICKER. Thank you very much, Mr. Chairman. I am 

glad to join you on this, our third, hearing on the state of the industry. 

Today, our focus is on the state of wireless communications in 

the United States. There is perhaps no platform for broadband delivery as dynamic and rapidly growing as mobile wireless communications. Consumers are turning to mobile technology in droves, 

making it their primary way of access to the Internet. 

Last year, global mobile data traffic grew 70 percent. When it 

comes to voice services, American consumers are consistently cutting the cord and transitioning from traditional landline service to 

wireless as their primary means for voice communication. According to a recent CDC study—interestingly, Mr. Chairman—Mississippi and Arkansas are leading the way in wireless-only households, with 42.3 percent of adults in Mississippi and 44.4 percent 

of adults in Arkansas making a full conversion. That same study 

found that, by the second half of 2011, one in three households had 

only wireless phones. The rapid migration to wireless raises a number of critical issues for policymakers, many of which will be mentioned and discussed by the witnesses on our panel today. 

As the Chair mentioned, one of the key issues for Congress to 

consider is how to maximize commercial access to spectrum in 

order to meet consumer demand for high-speed service and contentrich applications. One of the main avenues to achieve this goal is 

making the 1755–1780 megahertz band available for commercial 

services. This band was identified in the FCC’s National 

Broadband Plan for its commercial potential. When paired with the 

AWS–3 band, this spectrum can be quickly used to expand existing 

systems, spur innovation, and drive economic growth. 

I understand the wireless industry and Federal agencies have 

been working together to study this issue, and that the industry 

3 

has recently proposed a roadmap for clearing Federal systems out 

of the band. I urge DOD and other government entities currently 

using the band to continue to work together productively and in a 

quick, conclusive fashion to relocate operations and free up this 

spectrum for commercial and, ultimately, for consumer use. 

This committee also needs to monitor, closely, the progress of the 

FCC’s impending incentive auction of wireless broadcast spectrum. 

The success of this auction is critical to construction of the National Public Safety Broadband Network established in the Spectrum Act. It also would free up spectrum and raise much-needed 

revenue for deficit reduction. To achieve success, it is imperative 

that there be widespread all-inclusive participation in the auction. 

This is the best way to maximize revenues going forward, as Congress mandated. 

I would like to thank our witnesses for testifying today. We look 

forward to hearing your views on the issues of spectrum availability, the incentive auction, and the overall state of wireless services in this country. 

Thank you again, Senator Pryor, for holding this hearing, and I 

thank the members of our Committee, for their attendance and interest. 

Senator PRYOR. Thank you. 

Let me say that what we’ll do is, we’ll dispense with our opening 

statements, and everybody’s opening statement will be made part 

of the record. But, we would like to move quickly to our panel. 

We have a very distinguished panel today. I will recognize each 

one of them for a 5-minute opening. 

We would really appreciate it if you could keep it to 5 so that 

the Subcommittee would have plenty of time to ask questions. 

What I’ll do, just to save time, is, I’ll just go right down the list 

and then turn it over to Mr. Largent. 

First, we’re going to have the Honorable Steve Largent, President and CEO of CTIA, The Wireless Association. Second, we’re 

going to have Mr. Steven Berry, President and CEO of Competitive 

Carriers Association. Third, we’re going to have Mr. Doug Webster, 

Vice President, Service Provider Routing, Mobility and Video Marketing, Cisco Systems. Fourth, we will have Mr. Thomas F. Nagel, 

Senior Vice President, Business Development and Strategy, Communication and Data Services for Comcast Corporation. Next, we 

will have Mr. George Ford, Chief Economist of the Phoenix Center. 

And last, and certainly not least, we’ll have Delara Derakhshani, 

Policy Counsel for Consumers Union. 

So, again, welcome, all of you. And again, thank you, for the Subcommittee, for being here. 

Mr. Largent, if you’d lead us off. Thank you. 

STATEMENT OF STEVE LARGENT, PRESIDENT AND CEO, 

CTIA—THE WIRELESS ASSOCIATION®

Mr. LARGENT. Mr. Chairman, Ranking Member Wicker, and 

members of the Subcommittee, thank you for this opportunity to 

testify on behalf of CTIA. 

As we meet today, I’ve just returned from our annual spring 

show, and I really wish you could have joined us. You would have 

seen a great testament to the state of the wireless industry. It’s a 

4 

vibrant, dynamic ecosystem that’s innovative and competitive at 

every level. It’s also an environment in which U.S. leadership is a 

consistent and defining characteristic. 

Perhaps the best indicator of the wireless industry’s vibrancy is 

its investment record. If you believe that businesses commit capital 

to markets that are open and competitive, then the $30 billion that 

America’s wireless carriers invested in 2012, alone, is a very good 

sign. This massive investment serves as a catalyst for what we, at 

CTIA, like to call ‘‘the virtuous cycle of wireless investment and innovation.’’ Here’s what I mean by that: To start, capital expenditures drive the creation of networks capable of supporting greater 

speeds and functionalities. Those new networks create a demand 

for new and more powerful devices, which then drive the development of new applications and content. That leads the—to more consumer usage, and, as that grows, so does the need for more spectrum. 

This virtuous cycle is spinning at an incredible rate in the U.S. 

and is the reason why we are the world’s leading wireless market. 

We have more than 50 percent of the world’s 4G subscribers—let 

me repeat that—50 percent of the world’s 4G subscribers, in spite 

of the fact that the U.S. is home to just 5 percent of the world’s 

wireless subscribers. These subscribers use sophisticated phones 

and tablets that run on chips and operating systems developed by 

great American companies, like Qualcomm, Apple, Google, and 

Microsoft. And these networks and devices serve as the foundation 

for a U.S.-based applications industry that is creating jobs and 

transforming the way we consume information and engage in commerce. 

Along with changing the way consumers communicate, advanced 

wireless networks are enabling whole new vertical markets to 

emerge. Mobile commerce and finance, intelligent transportation, 

smart grid, and mobile health services and applications, are all 

made possible by the existence of robust wireless broadband capabilities. And each of these opportunities helps to transform our 

economy in positive ways. So, as I hope I’ve demonstrated, there 

are a lot of great things emanating from the U.S. wireless communications industry. The benefits of those developments are felt 

throughout our society. However, success is hard to achieve, and 

can be still harder to maintain. As a result, there is a vital role 

for Congress and other government entitles to enact smart policies 

that help the private sector to continue its hard work and innovation to advance U.S. leadership in this critical industry. 

Without question, the area where policy leadership is most important is access to spectrum. Carriers must have access to additional licensed spectrum in order to keep up with Americans’ demand for mobile broadband. Fortunately, Congress recognized this 

when it included provisions in last year’s SPECTRUM Act, authorizing the FCC to conduct incentive auctions. Although the FCC is 

moving to implement that legislation, it is critical that the incentive auction process move forward expeditiously. But, even if the 

incentive auction process yields the full 120 megahertz called for 

in the National Broadband Plan, numerous projections on increased network traffic clearly indicate we’re going to need more 

spectrum to keep up with the demand. In fact, much more. 

5 

1http://www.ctia.org/advocacy/research/index.cfm/AID/10316. 

2Didier Scemama, ‘‘Global Wireless CapEx: Increase 2013 Forecast by 7 percent,’’ Bank of 

America Merrill Lynch, January 6, 2013. 

To address that difference, Congress should, as it has in the past, 

look to repurpose bands held by Federal users for commercial use. 

It has worked well before, and it can work well again. One band 

that’s especially important in enabling wireless companies to meet 

expanding demand is the 1755–1780 megahertz spectrum. While 

that band is currently used domestically by DOD and other Federal 

agencies, it is used internationally for commercial mobile services. 

Harmonizing the U.S. allocation with international use will 

produce significant economies of scale and scope, and, importantly, 

make it possible for consumers to use their wireless devices outside 

of North America. There is a broad industry support for pairing the 

1755 band with the spectrum currently available for licensing at 

2155–2180. Current law requires 2155 band to be licensed by February 2015, and it’s our hope that the 1755 band can be made 

available so that the two bands can be auctioned together. 

Pairing these bands will ultimately maximize their value to the 

industry, consumers, and also to the government, as the auction of 

the two bands, together, will deliver significantly more revenue to 

the Treasury than would an auction of just 2155 band. 

CTIA looks forward to working with you to achieve this important objective. Thank you for your time today. 

[The prepared statement of Mr. Largent follows:] 

PREPARED STATEMENT OF STEVE LARGENT, PRESIDENT AND CEO, 

CTIA—THE WIRELESS ASSOCIATION®

Chairman Pryor, Ranking Member Wicker, and members of the Subcommittee, 

thank you for this opportunity to testify on behalf of CTIA—The Wireless Association®. 

As you begin today’s hearing, I have just returned from CTIA 2013, our annual 

spring trade show, which draws thousands of attendees from around the nation and 

around the world. I wish you could have joined us. Had you been able to do so, you 

would have seen a great testament to the state of the wireless industry—a vibrant, 

dynamic ecosystem that is innovative and competitive at every level. It is also an 

environment in which U.S. leadership, and the competitive advantage that leadership confers upon our national economy, is a consistent and defining characteristic. 

Perhaps the best indicator of the wireless industry’s vibrancy and competitiveness 

is its capital investment record. If you believe, as I do, that businesses commit capital to markets that are open and competitive, and where they have a chance to 

earn a compelling return on what they invest, then the $30 billion America’s wireless carriers invested in their networks in 2012 1—a nine percent year-over-year increase from 2011—is a very good sign. This investment, which according to Bank 

of America Merrill Lynch equals a quarter of global wireless investment last year,2

is all the more remarkable given the fact that the U.S. market includes just five 

percent of the world’s wireless subscribers. It’s a striking ratio: the U.S. comprises 

just five percent of the global wireless market but our investments outstrip that by 

five-fold. 

And, while the numbers are impressive, last year was not an anomaly. The wireless industry has always been an active investor. Since 2001, wireless carriers in 

the U.S. have invested nearly $300 billion in their networks, and this figure does 

not include more than $35 billion in carrier expenditures on spectrum auctioned by 

the FCC. 

This massive capital investment serves as a catalyst for what we at CTIA like 

to call ‘‘the virtuous cycle of wireless investment and innovation.’’ Sustained capital 

expenditures facilitate the creation of networks capable of supporting greater speeds 

and functionalities, which, in turn, bring about new and more powerful and useful 

devices. The availability of new devices encourages the development of new applicaVerDate Nov 24 2008 06:36 Apr 03, 2014 Jkt 075679 PO 00000 Frm 00009 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\87341.TXT JACKIE
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3 As of March 2013, the U.S. was estimated to have 52.5 percent of the world’s LTE subscribers, according to the Informa Telecoms & Media Group’s World Cellular Information System (WCIS) database. 4 BLS Consumer Price Index Databases (not seasonally adjusted). 

5 Centers for Disease Control and Prevention, ‘‘Wireless Substitution: State-level Estimates 

From the National Health Interview Survey, 2010–2011,’’ National Health Statistics Reports No. 

61, October 12, 2012. 6 Ibid. 

tions and content, which help to drive consumer usage. And as usage grows, so too 

does the need for ever-more robust networks and more spectrum. 

This ‘‘virtuous cycle’’ phenomenon is seen most vividly in the U.S. market, where 

the world’s most advanced Long-Term Evolution deployments have produced more 

than 50 percent of the world’s 4G subscribers.3 These subscribers use sophisticated 

devices that run on chips and operating systems developed by great American companies like Qualcomm, Apple, Google, and Microsoft. And these U.S.-derived networks and devices serve as the foundation for a fertile applications development industry—again, with its hub here in America—that is creating jobs and helping 

transform the way we consume information and engage in commerce. 

America’s wireless subscribers are the beneficiaries of this virtuous cycle. Carriers’ fourth-generation network deployments and device vendors’ launch of advanced handsets and tablets in the U.S. market put American consumers at the 

vanguard of global wireless users, all in an environment where the Bureau of Labor 

Statistics Wireless Price Index has declined in each of the last five years, and by 

nearly 40 percent over the last 15 years.4 It is unquestionably the best story in the 

telecom sector. 

Source: BLS Consumer Price Index Databases (not seasonally adjusted). 

As functionality has expanded and price has declined, adoption and usage have 

simultaneously exploded. Wireless subscriber units—that is, active devices associated with subscriptions or prepaid accounts—totaled 326.4 million separate devices 

at year-end 2012. That’s equal to 102 percent of the total U.S. population, a greater 

and greater percentage of which is making their wireless phone their only phone. 

In Arkansas and Mississippi, for instance, more than 40 percent of the population 

is now ‘‘wireless-only.’’ 5 By comparison, just eight percent of the population in those 

states is ‘‘wireline-only.’’ 6

Similarly, many people are making their wireless device their on-ramp to the 

Internet. This is particularly true among Hispanics and African-Americans, where 

ownership of a home computer lags the total population and the mobile device is 

a critical tool for closing the ‘‘digital divide.’’ Data shows that Hispanics and AfricanVerDate Nov 24 2008 06:36 Apr 03, 2014 Jkt 075679 PO 00000 Frm 00010 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\87341.TXT JACKIE

604LARGE1.eps
7 

7Pew Research Hispanic Center, ‘‘Closing the Digital Divide: Latinos and Technology Adoption,’’ March 7, 2013. Available at http://www.pewhispanic.org/2013/03/07/closing-the-digitaldivide-latinos-and-technology-adoption/. 8Pew Research Center, ‘‘Teens and Technology 2013,’’ March 13, 2013. Available at http:// 

pewinternet.org/∼/media/Files/Reports/2013/PIPlTeensandTechnology2013.pdf. 9http://www.ctia.org/advocacy/research/index.cfm/AID/10316. 

Americans are significantly more likely to use their mobile devices to go online.7

Overall, 55 percent of wireless users (and 74 percent of those under age 50) now 

use their mobile devices to access the Internet,8 with aggregate data usage now exceeding 1.5 trillion megabytes.9

Beyond changing the way that consumers communicate, the prevalence and power 

of 4G wireless networks is enabling whole new vertical markets to emerge. Mobile 

payment, intelligent transportation, smart grid and mobile health services and applications are made possible by the existence of robust, ubiquitous wireless 

broadband capabilities. Each of these opportunities can help transform our economy 

in positive ways, helping to drive additional investment and job creation. The last 

of these verticals, mobile health, is particularly exciting, as innovative m-health 

technologies and applications have enormous potential to improve the efficiency of 

health care delivery in the U.S. and around the world through more personalized 

care for patients, by reducing health care costs, and by eliminating geographic and 

economic barriers to the delivery of health services. 

So, as I hope I’ve demonstrated, there are a lot of great things emanating from 

the U.S. wireless communications industry and the benefits of those developments 

are felt throughout our society. However, as you know, success is hard to achieve 

and can be still harder to maintain. 

As a result, there is a vital role for policymakers—chiefly Congress, but also including the FCC, NTIA and other government entities—to complement the great 

work being done in the private sector with smart government policies that create 

an environment in which the private sector can work hard, innovate and advance 

U.S. leadership in this critical, ever-expanding industry. 

Without question, the most important area where continued policy leadership is 

necessary is access to spectrum. In order to keep pace with the demand Cisco will 

describe in its testimony, the wireless industry needs access to more spectrum. 

Spectrum is the resource on which all of the benefits that spring from wireless 

communications are founded. While manufacturers have tenaciously devised and 

used advanced technologies to get the most out of existing spectrum allocations and 

though carriers have innovatively used unlicensed Wi-Fi spectrum to ‘‘offload’’ traffic 

from carrier networks, those efforts are simply not enough. Carriers must have access to additional licensed spectrum in order to keep up with technological requirements and exploding consumer demand for mobile broadband. 

Fortunately, Congress recognized this when it included provisions in last year’s 

Middle Class Tax Relief and Job Creation Act which authorized the FCC to conduct 

incentive auctions that may result in the conversion of some television broadcast 

spectrum for wireless broadband use. The FCC is moving to implement that legislation and it is vitally important that the incentive auction process move forward expeditiously. It is equally important that the Commission get it right. But even if 

the incentive auction process yields the 120 MHz called for in the National 

Broadband Plan, that and other bands identified for auction by last year’s legislation will only represent a portion of what is needed for the industry to meet consumers’ and businesses’ need for wireless bandwidth. 

To address the difference between what the incentive auctions yield and what is 

necessary to achieve the five-and ten-year spectrum targets set by the National 

Broadband Plan, Congress should, as it has in the past, look to repurpose bands 

held by Federal users for commercial use. It has worked well before and it can work 

well again. According to a 2011 GAO study, the Federal Government operates in approximately 70 percent of the spectrum below 3 GHz—18 percent on an exclusive 

basis and 52 percent on a shared basis with non-government users. Just as it is appropriate to ensure that spectrum available to the private sector is being used efficiently and for the most highly valued services, the Federal Government must 

evaluate the use of its own spectrum and free spectrum for commercial operations 

wherever possible. The far-reaching benefits to our national economy are too vital 

to do otherwise. 

One frequency band currently occupied by Federal users that would be particularly helpful in allowing wireless companies to meet rapidly expanding demand is 

the 1755–1780 MHz spectrum. In the U.S., that band is currently used by the Department of Defense and other Federal agencies. However, the band is identified 

internationally for commercial mobile services and is used for that purpose throughVerDate Nov 24 2008 06:36 Apr 03, 2014 Jkt 075679 PO 00000 Frm 00011 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\87341.TXT JACKIE
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10http://www.brattle.com/ldocuments/UploadLibrary/Upload938.pdf. 

out most of the world. Reallocation of the band would harmonize U.S. allocation of 

spectrum with international use, produce economies of scale and scope, and, importantly, make possible consumer use of their wireless devices outside North America 

by alleviating compatibility problems. The 1755–1780 MHz band is also immediately 

adjacent to existing domestic wireless commercial spectrum and would therefore fit 

seamlessly into the current mobile broadband spectrum portfolio, allowing for more 

immediate equipment development and deployment as well as facilitating easy migration of existing and developing technologies to these bands. 

There is broad industry support for pairing the 1755–1780 MHz band with spectrum currently available for licensing at 2155–2180 MHz. Current law requires the 

2155–2180 MHz band to be licensed by February, 2015 and it is our hope that the 

1755–1780 MHz band can be made available so that the two bands can be auctioned 

together. Pairing these bands will maximize their value not only to industry, but 

also to the government. A study by the Brattle Group found that auctioning the 

2155–2180 MHz band by itself would yield $3.6 billion, but when paired with the 

1755–1780 MHz band, the pairing could generate $12 billion.10 Given the budget realities facing Congress and the country, a difference of that magnitude should not 

be ignored. 

To be clear, CTIA recognizes that there are legitimate Federal spectrum needs 

that must be protected, and we believe that last year’s improvements to the Commercial Spectrum Enhancement Act provide an appropriate framework for Federal 

relocation. Handled appropriately, relocation of Federal users from prime bands 

below 3 GHz can facilitate movement to state-of-the-art technology. This will reduce 

ongoing maintenance and procurement costs for Federal agencies and free up scarce 

resources under current budget caps. Wireless carriers can then use the relinquished spectrum to provide services and grow the economy, resulting in a win-winwin outcome for Federal users, wireless carriers, and the American public. For these 

reasons, CTIA urges the Subcommittee to remain focused on spectrum policy. 

Beyond a continued focus on bringing spectrum to market, two other areas where 

policy matters are regulation and taxation. With respect to the former, Congress established a deregulatory framework to govern wireless services twenty years ago 

and given the industry’s record of investing, innovating, and competing, there is 

abundant evidence that charting that course was the right decision. Congress and 

the Commission should continue this long-standing commitment to ‘‘light touch’’ regulation and avoid imposing regulatory mandates that will raise costs and inhibit 

competitive differentiation among providers. 

Another area where policy can have a significant impact is taxation, and though 

tax policy is not necessarily within the province of this Committee, it is so important 

that it merits mention in this discussion. Corporate tax reform, keeping Internet access free from taxation, and the idea that wireless service and digital goods should 

benefit from clear rules preventing discriminatory taxation are all issues this Congress may address, and getting these issues right is vitally important. We need to 

retire the regressive, inefficient system of telecommunications taxation designed for 

Ma Bell and replace it with a 21st century tax system that reflects the reality that 

communications connectivity is central to virtually every aspect of our economy. 

Together, the right spectrum policies, regulatory restraint and sound tax policy 

can combine to support the investment and innovation that are pervasive in the 

wireless ecosystem, and which so demonstrably benefit the American public and 

economy. CTIA looks forward to working with you to achieve these objectives. 

Thank you for your time today. 

Senator PRYOR. Thank you. 

Mr. Berry. 

STATEMENT OF STEVEN K. BERRY, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, COMPETITIVE CARRIERS ASSOCIATION 

Mr. BERRY. Thank you, Mr. Chairman, Ranking Member Wicker, 

and members of the Subcommittee. Thank you for inviting me to 

testify today about the competition in the wireless industry. 

I’m here today on behalf of the Competitive Carriers Association, 

representing over 100 wireless carriers and nearly 200 vendors and 

suppliers that support that competitive wireless ecosystem. My 

9 

membership believes and includes innovative competitors of all 

sizes, from Sprint to Bug Tussel Wireless, in Wisconsin, and every 

members’ district in every members’ state that’s here today. 

I’d like to talk about competition and what is needed to have a 

competitive wireless industry for years to come, and I may differ 

a little from my colleague sitting next to me. We are at a crossroads. Policymakers have two choices. One path leads down a dangerous road of continued concentration, the other creates a new 

framework for competition. Without a competitive framework, increased regulation will be needed to artificially replicate the benefits of competition. And none of us want that. The virtuous cycle 

that Steve refers to may become the vicious cycle if the small carriers can’t get access to spectrum and devices. AT&T and Verizon 

dominate a wireless industry that’s already heavily concentrated, 

more so than the auto, oil, or banking industries. The two largest 

wireless carriers control 70 percent of all revenue in the wireless 

industry, compared to the two top automakers controlling 35 percent, oil controlling 25 percent, the top two largest banks, only 20 

percent of the wireless—of the industry revenues. Policymakers 

should focus on a framework to create the next generation of competition. 

At CCA’s spring event, I, too, met with my members and a diverse membership at CCA, and one of the main themes of our expo 

was growth. And with the right framework, our competitive carriers believe we’re prime for economic growth, job creation, expansion of mobile broadband throughout the Nation, and a competitive 

framework that supports continued light-touch regulatory regime. 

There are three things the FCC can do today to help make this 

happen. First, the FCC should immediately restore interoperability 

into the lower 700 megahertz band. Interoperability has been fundamental to the wireless industry since its inception, and has supported the devices and roaming relationships. That all changed 

after auction 73, when AT&T was allowed to carve out a unique 

band plan in the lower 700. 

Mr. Chairman, in 2008, following the auction, you said, ‘‘History 

will show that the way the FCC structured the auction basically 

helped the two big wireless companies, to the detriment of competition in this country.’’ History has proven your concerns to be accurate, Mr. Chairman. Yet, history need not repeat itself. 

The lower 700 megahertz band, unlike Humpty Dumpty, can be 

put back together again. It requires immediate action from the 

FCC. And the record is now complete, and the FCC must immediately act to restore interoperability, which will allow competitive 

carriers to utilize over $2 billion invested in beachfront spectrum. 

This will allow access to devices, data roaming, expandable 

broadband, especially in rural America, and spark new competition 

in the industry. 

Second, but maybe more important in the long run, competitive 

carriers must have access to spectrum. The FCC must revise its 

broken decade-old spectrum screen and apply those new rules to 

the upcoming incentive auction, using the authority the Congress 

just reaffirmed. Congress got it right, set the right tone; now it’s 

up to the FCC to implement a competitive auction. Spectrum must 

be made available in small geographic areas so that the greatest 

10 

number of carriers can participate, sized for bidding by all carriers. 

This means that it should be in CMAs, cellular market areas, in 

blocks of spectrum. This would maximize revenue to the Treasury, 

and the U.S. taxpayer will thank you. 

Let me be clear. All carriers, including Verizon and AT&T, 

should be allowed to participate in the auction. However, limiting 

how much spectrum any one carrier can obtain in a particular market just makes sense. No one or two carriers should be able to walk 

away with the entire pie. Some have claimed that DOJ’s analysis 

tries to rig the auction. I don’t read it that way, and nor does Attorney General Dick Thornburgh, who served under five Presidents. 

He recently wrote the DOJ and the FCC, and suggested that that 

policy is consistent with the competition policy under Republican 

and Democratic administrations, alike. 

I’d like to have his letter included in the record, if that’s OK, Mr. 

Chairman. 

Senator PRYOR. Without objection. 

[The information referred to follows:] 

11 


604THORN1.eps

VIA ELECTRONIC FILING 

Acting Chairwoman Mignon Clyburn 

Commissioner Jessica Rosenworcel 

Commissioner Ajit Pai 

Federal Communications Commission 

445 12th Street, S.W. 

Washington, D.C. 20554 

Ex Parte Presentation 

WT Docket No. 12·269 

K&L GATES LLP 

1601 K STREET, N.W. 

WASHINGTON, DC 20006-1600 

T 202.nuooo f 202.n&.9100 KLGATES.COM 

June 3, 2013 

Policies Regarding Mobile Spectrum Holdings 

Dear Acting Chairwoman Clyburn and Commissioners Rosenworcel and Pai: 

On behalf of Sprint Nextel Corporation ("Sprint"), I hereby submit this letter in support ofthe 

recently filed ex parte submission of the United States Department of Justice (the "Department") 

in the above-referenced proceeding. I 

I have had the privilege of serving in the Department under five presidents, including as U.S. 

Attorney General in the cabinets of Presidents Reagan and George RW. Bush, as Assistant 

Attorney General in charge of the Criminal Division, and as U.S. Attorney for the Western 

District of Pennsylvania. After reviewing the Department's Ex Parte in this proceeding, I 

believe it is fully consistent with its longstanding approach to competition policy under 

Republican and Democratic administrations alike. As a life-long Republican, I am proud that 

President Theodore Roosevelt was the first to promote and vigorously enforce our nation's 

antitrust laws? President Roosevelt recognized the pro-business importance of breaking the grip 

of monopolists that were stifling competition and innovation to the detriment of the U.S. 

economy and conswners. I am also proud both of the antitrust enforcement record of the 

administrations I served and of their having pursued their enforcement efforts with a focus on the 

twin goals of using sound economic theory to promote consumer welfare and increasing 

regulatory predictability.' 

See Ex Parte Submission of the United States Department of Justice, wrDocket No. 12-269 (filed April 

11 , 2013) ("Department's Ex Part~ ; see also utter from Wayne Watts, Sr. Executive Vice President and General 

Counsel, AT&T Inc., to Chairman Genachowski, er al., WT Docket No. 12-269 (filed April 24, 2013) ("AT&T 

Letter"); Letter from Fred Upton, Chainnan, Committee on Energy & Commerce, U.S. House of Representatives, et 

al., to Julius Genachowski, Chairman, FCC, WT Docket No. 12-269, at 3 (filed April 19,2013). 

1 See, e.g., Northern Securities Co. v. U.S., 193 U.S. 197 (1904). 

3 See generally Broder, U.s. Antitrust Law and Enforcement, Ch. I [0] (Oxford University Press, 2d ed. 

2012). For example, in 1982 the Department issued the first substantial revision to its Merger Guidelines since the 

original Guidelines were released in 1968, providing companies planning major transactions with insight into the 

process used by the agencies to decide whether to challenge the proposed transaction as anticompetitive. See 

Eleanor M. Fox, introduction: The 1982 Merger Guidelines: When Economists Are Kings?, 71 Cal. L. Rev. 281 , 

296 (1983) (describing the growing "consensus that antitrust should not be used in ways that interfere with 

efficiency" and that "economics should be used to inform antitrust"); Janusz A. Ordover & Robert D. Willig, The 

klgates.com 
12 


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Page 2 

June 3, 2013 

The Department's Ex Parte recognizes the importance of these goals and properly draws upon 

decades of its antitrust policies and precedents in offering its comments. 4 For the last 40 years, 

the Department has consistently supported public policies that promote competition and 

innovation in the telecommunications industry-from the breakup of the Bell System in 1984 

during the Reagan administration, to the allocation of new broadband pes spectrum as 

competition to the old analog cellular duopoly during the George H.W. Bush administration, to 

challenges to proposed telecommunications mergers under the George W. Bush administration, 

to the Department's exercise of its case-by-case merger review authority.s 

In the wireless telecom context, the Department has necessarily worked closely with the 

Commission due to the spectrum ·management implications of such matters.6 In this proceeding, 

the Department simply continues this well-established practice by commenting on how 

prospective rules of general applicability for both spectrum auctions and secondary market 

transactions could protect and enhance the competitive dynamic of the wireless sector to the 

benefit of the American economy, consumers, and businesses. 

Unfortunately, it appears that the Department's Ex Parte has been misconstrued by others as 

seeking to "rig" a specific auction (the upcoming 600 MHz Broadcast Incentive Auction) for the 

benefit of specific parties and to the detriment of other specific parties. I do not read the 

Department's Ex Parte to do any such thing. Rather, consistent with its longstanding approach, 

it encourages the Commission to adopt reasonable spectrum aggregation limits to protect 

competition and promote innovation in the wireless sector. 

Moreover, as someone who has spent much of his career in law enforcement and as a two-tenn 

governor of Pennsylvania, I strongly support deployment of the FirstNet public safety broadband 

network that will be funded by spectrum auctions. I would not be speaking in favor of the 

Department's Ex Parte if! believed reasonable spectrum aggregation limits posed a substantial 

risk of depressing auction proceeds and thereby undermining FirstNet. 7 

1982 Department of Justice Merger Guidelines: An Economic Assessment, 71 Cal. L. Rev. 535, 535, 574 (1982 

Merger Guidelines designed to "close the gap" between enforcement of the merger statutes and "the new learning in 

industrial economics" in a way that "protects competition and promotes social welfare"). 

4 Department Ex Parte at 2. 

Department Ex Parte at 2-3; see United Stales v. GTE Corp., 603 F. Supp. 730 (D.D.C. 1984) (noting that 

as conditions of GTE Corp.'s proposed acquisition of Southern Pacific Communications Company, the Department 

required GTE to (i) separate its local monopoly operations from its long distance and other competitive operations, 

(ii) provide equal access to all competitors on a phased-in basis, (iii) not provide interexchange services, (iv) phase 

out its existing interexchange services, and (v) agree to other competitive restrictions); U.S. v. SBC Commc 'ns, Inc., 

489 F. Supp. 2d I (D.D.C. 2007) (describing Department challenges to two similar telecommunications mergers to 

prevent excess concentration of "last mile" connection holdings); U.s. v. AT&T Inc. and Dobson Commc'ns Corp., 

541 F. Supp. 2d 2 (D.D.C. 2008) (describing Department challenges to AT&T's acquisition of competitor to 

prevent AT&T from controlling all or most of the low frequency band cellular spectrum licenses in several rural 

local markets). 

6 It should be noted that the notion of using competitive bidding as the preferred method of licensing 

spectrum was first published at the Commission during the Reagan Administration. See Evan Kwerel & Alex D. 

Felker, Using Auctions to Select FCC Licensees Office of Plans and Policy, Working Paper Series 16, Federal 

Communications Commission (May 1985). 

7 In addition to my past service in the Department, I am currently a member of the FBI Director's Advisory 

Board. 
13 


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Page 3 

June 3, 2013 

One frequent refrain I heard from the businesses community when I was governor of 

Pennsylvania was the need for regulatory predictability. The Antitrust Division's transactionspecific merger review does not always provide perfect guidance for every prospective 

transaction. With this in mind, I can understand why the Department would support the 

prospective certainty that reasonable FCC spectrum aggregation limits would provide. With 

such a rule, carriers would gain the benefit of knowing in advance how much spectrum they 

could obtain and how much their rivals could purchase in an auction or secondary market 

transactions. In particular, such certainty would help prospective auction participants prepare 

their business plans, models and strategies, and obtain necessary financing. leading to a more 

effective and efficient auction. Spectrwn aggregation caps were in place before the Commission 

launched its Broadband PCS auctions in the 1990s. Those auctions were famously successful, 

raising billions in revenue and creating numerous new wireless competitors. 

Lastly, some argue that the Department's Ex Parte conflicts with the spectrum-related provisions 

of the Middle Class Tax Relief and Job Creation Act of2012 because, they assert, it would 

exclude qualified bidders and thereby put the Commission in the position of picking winners and 

losers.' Here again, I do not read the Department's Ex Parte as supporting such an approach. As 

I understand the contemplated limits, it would not make a bidder ineligible to participate in an 

auction. Rather, it would provide prospective guidance on how much spectrum a bidder could 

acquire in an auction based either on its current spectrum holdings or an auction-specific cap. 

This approach is far more efficient than spectrum divestitures post-auction or as conditions to 

secondary market transactions. Indeed, Congress recognized the utility of spectrum aggre~ation 

limits when it preserved the Commission's jurisdiction to adopt them in the Spectrum Act. In 

this rulemaking proceeding, therefore, the Commission is doing exactly what the Spectrum Act 

reaffinned--exercising its jurisdiction to consider the adoption of reasonable spectrum 

aggregation limits. 

For the foregoing reasons, I support the Department's Ex Parte as consistent with longstanding 

Department policy and precedent and the Commission's efforts to adopt appropriate rules to 

promote competition and innovation in the wireless telecommunications sector. 

Respectfully submitted, 

Dick Thornburgh 

Pub. L. No. 112-96, 126 Stat. 156 (2012) (the "Spectrum Act"). 

Reply Comments of Sprint Nextel Corporation at 2-3. WT Docket No. 12-269 (January 7. 2013). 
14 

Mr. BERRY. And speaking about spectrum, incentive auctions 

should not be the only source of additional spectrum. Carriers need 

a functioning secondary market, and Federal holdings must be reviewed and, where possible, reallocated for commercial use. I totally agree with Mr. Largent that the 1755–1780 and 2155–2180 

needs to be paired and sold, and we ought to do it today. 

Finally, access to the networks is critical. As the transition to all 

IP networks move forward, the bedrock technology-neutral interconnection principles directed by Congress in the 1996 Act must be 

reaffirmed. 

Mr. Chairman, CCA and our members stand ready to help you 

and the Committee restore competition, spur investment and innovation, create jobs, and expand mobile broadband in rural America. 

Thank you. 

[The prepared statement of Mr. Berry follows:] 

PREPARED STATEMENT OF STEVEN K. BERRY, PRESIDENT AND CHIEF EXECUTIVE

OFFICER, COMPETITIVE CARRIERS ASSOCIATION

‘‘COMPETITION AT THE CROSSROADS: PREVENTING DUOPOLY IN TODAY’S WIRELESS

MARKETPLACE’’ 

Chairman Pryor, Ranking Member Wicker, and members of the Subcommittee, 

thank you for inviting me to testify about the state of competition in the wireless 

industry. I am here today on behalf of the Competitive Carriers Association, the nation’s leading association of competitive wireless carriers, with over 100 carrier 

members ranging from small, rural providers serving fewer than 5,000 customers 

to regional and national providers serving millions of customers. We also represent 

almost 200 Associate Members—small business vendors and suppliers that serve 

carriers of all sizes and employ your constituents. The entire mobile ecosystem serving competitive carriers is dependent on vibrant competition in the wireless industry 

at all levels. CCA’s diverse membership is bound together by a shared goal for competitive policies and a shared concern over the growing market power of the ‘‘Twin 

Bells’’—AT&T and Verizon. Through a steady stream of acquisitions, these two dominant carriers have turned what once was a robustly competitive wireless marketplace into an industry marching towards duopoly. I know that several members of 

this Subcommittee, as well as the Federal Communications Commission and the Department of Justice, have voiced the same concerns. 

In my testimony today, I will provide a snapshot of today’s wireless industry, 

elaborate on the challenges facing competitive carriers, and offer proposals for restoring wireless competition going forward. Indeed, policymakers have two distinct 

and different paths for the future of the wireless industry—allow continued market 

dominance by two carriers and cement a duopoly in the industry, which will ultimately result in a heavy regulatory regime to attempt to replicate the benefits of 

competition, or establish a new competitive agenda for the next generation which 

will fuel economic investment, job creation, innovation, and increased consumer access to all the benefits of mobile broadband. Our members are prepared to invest, 

innovate, and create jobs, but need access to critical inputs to expand and grow 

their businesses. 

To fully appreciate where we stand as an industry, it is important to take stock 

of how we got here. The wireless industry in the United States actually began as 

a duopoly in 1981, when the Federal Communications Commission (‘‘FCC’’) divided 

a total of 50 MHz of cellular spectrum in each local area between just two providers, 

one of which was the incumbent wireline telephone company. Even with this duopoly, policies required the incumbent to support connectivity—interoperability and 

roaming—to prevent a monopoly. Congress broke-up this original duopoly in 1994, 

when it provided the FCC with auction authority that led to making available 120 

MHz of PCS spectrum. That auction, along with later auctions in other spectrum 

bands, gave rise to a host of new wireless carriers and sparked increased competition. For many years, until the late 2000s, the wireless industry was a shining example of robust competition, with numerous carriers at the national and regional 

level competing to deliver steadily improving services at declining prices. In the 

FCC’s first 13 reports on the state of competition in the wireless industry released 

between 1995 and 2009, the agency was able to conclude that the industry was 

15 

1See CTIA, Interview with Kevin Martin, at 6, Wireless Wave (Fall 2005), available at http:// 

www.ctia.org/advocacy/index.cfm/AID/10522. 2 Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993, Annual 

Report and Analysis of Competitive Market Conditions with Respect to Mobile Wireless, Including 

Commercial Mobile Services, WT Docket No. 11–186, Sixteenth Report, FCC 13–34, ¶ 2 (rel. Mar. 

21, 2013) (‘‘16th Mobile Wireless Competition Report’’). 3 Id. ¶ 52. 4See Free Press, Why the AT&T–T-Mobile Deal Is Bad for America, Mar. 22, 2011, at 1, available at http://www.freepress.net/sites/default/files/fp-legacy/ATT–TMobile.pdf. 5 16th Mobile Wireless Competition Report ¶ 129. 

characterized by either growing competition or ‘‘effective competition.’’ Policymakers 

hailed the wireless industry at the time as ‘‘one of the great success stories’’ resulting from Congress’s and the FCC’s efforts to establish and maintain a regulatory 

framework in which competition could thrive.1

Today, however, the gains in wireless competition over the past two decades are 

in danger, as the Twin Bells threaten to drag the industry back towards a duopoly. 

The Twin Bells have gobbled up numerous competitive carriers in recent years, including ALLTEL, Dobson, Centennial, Rural Cellular Corporation, and a long list 

of others. And as AT&T and Verizon have grown, so too has the level of industry 

consolidation. According to the FCC’s latest competition report, the wireless industry’s Herfindhal-Hirschman Index (HHI) value—a common measure of consolidation—had grown to 2,873 by the end of 2011.2 To put that in perspective, that figure 

is 373 points higher than the level considered ‘‘highly concentrated,’’ and 722 points 

higher than the level measured in 2003, the first year the FCC calculated HHIs. 

The report also found that the Twin Bells together account for an astounding 67 

percent of industry revenue.3 That combined share is far higher than the combined 

shares for the top two firms in other ‘‘consolidated’’ industries. By comparison, the 

top two firms in the auto industry hold a 35 percent share of total revenue; the top 

two firms in the oil industry hold a 24 percent share; and the top two firms in the 

banking industry hold a 20 percent share.4 Not surprisingly in light of these figures, 

the FCC has been unable to find ‘‘effective competition’’ in the wireless industry in 

any of its last three annual competition reports. 

The Twin Bells are not content merely holding a dominant position in the wireless 

marketplace; they have also abused their dominance by blocking competitors’ access 

to key inputs that are necessary for a competitive market to exist. For instance, 

AT&T and Verizon each continue to aggregate massive amounts of wireless spectrum—which the FCC calls ‘‘the lifeblood of the wireless industry’’—by using their 

vast resources to purchase large swaths of spectrum. Since the start of 2012, these 

two carriers have filed to gain access to almost 800 licenses in bands used to offer 

mobile services, including nearly 300 licenses in bands below 1 GHz. Some of the 

most significant wireless deals in recent memory have been spectrum-only transactions, such as Verizon’s 2012 acquisition of AWS–1 licenses from the four largest 

cable companies, AT&T’s 2012 acquisition of NextWave Wireless and its substantial 

WCS and AWS spectrum holdings, and AT&T’s 2011 acquisition of Qualcomm’s nationwide licenses in the Lower 700 MHz band. The Twin Bells’ spectrum holdings 

below 1 GHz—‘‘beachfront’’ spectrum in bands ideally suited for new entrants and 

smaller carriers seeking to expand their coverage—are particularly extensive. The 

FCC estimates that Verizon holds 45 percent of the spectrum in the two major 

bands below 1 GHz, while AT&T holds 39 percent of the spectrum in those bands.5

The more of this spectrum the Twin Bells stockpile for themselves, the less is available to competitive carriers. And as they continue to tighten their stranglehold on 

spectrum and other key inputs—like access to networks for roaming and interconnection, and access to cutting-edge, interoperable devices—the wireless industry 

today looks more and more like the duopoly of a generation ago. 

The industry thus stands at a crossroads, with two possible paths forward. One 

option would be to do nothing, and allow AT&T and Verizon to continue swallowing 

their competitors, aggregating spectrum, and thwarting access to other critical inputs. Eventually, the Twin Bells’ control over the marketplace would become so absolute, and competition would be so severely damaged, that a return to heavy-handed, utility-style regulation might be necessary to ensure reasonable prices and quality service. Most policymakers would not welcome this outcome, nor would CCA and 

its members. But the increasing dominance of a duopoly will compel a regulatory 

response if competition is not available to discipline prices, ensure responsive service, and deliver other benefits to consumers. 

The other path—and in CCA’s view, the far better option—would be to promote 

increased competition by preventing further consolidation by the Twin Bells and 

adopting rules to encourage a competitive framework and preserve access to key inputs. CCA has advanced concrete proposals for such reforms before the FCC and 

16 

6Policies Regarding Mobile Spectrum Holdings, Notice of Proposed Rulemaking, 27 FCC Rcd 

11710 ¶ 4 (2012). 7 Ex Parte Submission of the U.S. Dep’t of Justice, WT Docket No. 12–269, at 9 (filed Apr. 

11, 2013) (‘‘DOJ Ex Parte Submission’’). 8 16th Mobile Wireless Competition Report ¶ 122. 9DOJ Ex Parte Submission at 1. 

Congress. In particular, and as I will discuss in greater detail, the FCC should 

adopt rules to safeguard competitive carriers’ access to spectrum—both by updating 

the ‘‘spectrum screen’’ used to evaluate wireless acquisitions, and by structuring 

spectrum auctions in a way that encourages and rewards participation by a range 

of competitive carriers. The FCC should also ensure that its rules preserve competitive carriers’ access to networks, by enforcing roaming requirements and by reaffirming interconnection obligations. And the FCC should facilitate access to devices by restoring interoperability and by working with the Copyright Office to reinstate consumers’ ability to unlock their handsets. Such measures, if adopted and implemented promptly, may well be what the industry needs to avert a true duopoly 

and to restore competition in this once vibrant marketplace. 

Access to Spectrum 

The FCC should start by ensuring that spectrum is allocated efficiently, and in 

a way that enables wireless competition to flourish. The FCC has made clear time 

and again that access to spectrum is a ‘‘precondition to the provision of mobile wireless services’’ and is ‘‘critical for promoting the competition that drives innovation 

and investment.’’ 6 The Department of Justice (‘‘DOJ’’) echoed this sentiment in a 

recent submission to the FCC, where it stated that soaring demand for mobile 

broadband in recent years has ‘‘made spectrum a critically scarce resource’’ for wireless carriers.7 Both agencies also have recognized that access to low-frequency spectrum—which can provide ‘‘the same geographic coverage, at a lower cost, than higher-frequency bands’’ 8—is especially important for new entrants and smaller carriers. 

In this vein, DOJ has urged the FCC to adopt rules ensuring that competitive carriers have the opportunity to acquire spectrum, particularly in low-frequency 

bands—a measure DOJ says would ‘‘improve the competitive dynamic’’ in the industry and ‘‘benefit consumers.’’ 9 CCA agrees entirely with the DOJ’s assessment, and 

has proposed a slate of reforms to advance the procompetitive goals that I know 

both agencies share. 

In particular, CCA has urged the FCC to overhaul its ‘‘spectrum screen’’—the tool 

the agency uses to identify spectrum acquisitions, in the secondary market or at 

auction, which may give an entity control over too much spectrum in a given area. 

For years, the screen has played a key role in the FCC’s efforts to evaluate the effects of proposed transactions and auction design choices. But the screen, first 

adopted in 2003, is a poor fit for today’s marketplace. Among other things, the current screen fails to account for important differences between high and low frequency spectrum bands. And the screen largely ignores competitive effects at the 

national level, despite the FCC’s recognition that those effects are vital in today’s 

marketplace. The FCC must complete the Mobile Spectrum Holdings Rulemaking, 

currently in process, before the upcoming broadcast incentive auction rules can be 

established. 

In light of these deficiencies, CCA has proposed targeted reforms—the FCC needs 

to adopt two additional screens. First, the FCC should adopt a separate screen for 

low-frequency spectrum as a supplement to the existing screen, which looks to all 

forms of spectrum held by an entity in a local area. Second, the FCC should apply 

a nationwide screen in addition to its analysis of local holdings. There should be a 

clear and predictable mechanism for adding or removing spectrum from the analysis. And finally, the FCC should apply a heightened level of scrutiny for transactions exceeding any applicable screen threshold. Such reforms not only would 

strengthen the screen as a tool for evaluating spectrum transactions, but also would 

provide the necessary certainty to entities contemplating spectrum acquisitions. The 

FCC should adopt these reforms as soon as possible—by the end of 2013 at the latest, and in all events before the new incentive auction for repurposed broadcast 

spectrum is underway. 

The upcoming incentive auction offers one of the few near-term opportunities to 

allocate low-frequency spectrum for mobile broadband, and so presents an excellent 

opportunity to stoke the embers of wireless competition. As Chairman Pryor noted 

about the 700 MHz auction in 2008, ‘‘[h]istory will show that the way the FCC 

structured the auction basically helped the two big wireless companies to the detVerDate Nov 24 2008 06:36 Apr 03, 2014 Jkt 075679 PO 00000 Frm 00020 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\87341.TXT JACKIE
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10 John Eggerton, Pryor: FCC ‘Fouled Up’ Spectrum Auction, Broadcasting & Cable, Feb. 26, 

2008, available at http://www.broadcastingcable.com/article/112604-PryorlFCClFouledl 

UplSpectrumlAuction.php. 

riment of competition in this country.’’ 10 With the upcoming incentive auctions, the 

FCC has the authority, as recently reaffirmed by Congress, to ‘‘adopt and enforce 

rules of general applicability, including rules concerning spectrum aggregation that 

promote competition.’’ 

CCA thus has urged the FCC to design its rules for the upcoming incentive auction in a manner that gives carriers of all sizes a meaningful opportunity to acquire 

spectrum where needed. The FCC must adopt a spectrum auction process which ensures that all carriers have a meaningful opportunity to participate. All carriers, including smaller carriers, must have an opportunity to bid, win, and integrate needed 

spectrum into their existing network. In particular, consistent with last year’s Spectrum Act, the FCC should adopt eligibility rules for the auction that would prevent 

excessive spectrum aggregation by the Twin Bells. CCA also supports the use of bidding credits and related mechanisms that would promote participation by rural, 

mid-size, and regional carriers. The FCC must make spectrum available in small 

geographic areas, such as Cellular Market Area (CMAs), that can be used by competitive carriers, and must not include blind and package or combinatorial bidding 

practices that may prevent smaller carriers from accessing spectrum even if licensed 

in small geographic sizes. These measures will be vital to the success of the auction, 

and by extension to the advancement of competition in the wireless industry. This 

will also increase potential revenue from the auction by encouraging participation 

from the maximum number of bidders, while also providing carriers with much 

needed spectrum to compete in a data hungry market. 

Additionally, policymakers should consider new ways of encouraging full spectrum 

usage in rural areas. For example, the Rural Spectrum Accessibility Act introduced 

last Congress by Senators Snowe and Klobuchar would encourage carriers to partition or disaggregate spectrum not currently being used in areas to make it available 

for use by competitive carriers wishing to serve those rural markets. While additional spectrum is needed to allow the industry to keep up with consumers’ demands, it is important for policymakers to consider all opportunities to make full 

utilization of spectrum currently allocated for mobile broadband. 

A close look at current spectrum utilization is not complete without careful consideration of the Federal government’s use of spectrum. I commend the work of those 

on this Committee, in Congress, and at the FCC and NTIA who continue to ensure 

efficient spectrum use by Federal users. Congress should ensure the appropriate incentives are in place to encourage efficient Federal use and to encourage reallocation of spectrum for mobile broadband use where necessary. Doing so allows taxpayers the maximum usage and return for a finite, taxpayer-owned resource. In particular, I praise the FCC’s work to clear the 1695 MHz—1710 MHz band and the 

1755 MHz—1780 MHz band to auction paired with the 2155 MHz—2180 MHz band. 

This allocation would yield readily usable spectrum already in an LTE ecosystem 

and internationally harmonized, encouraging investment in mobile broadband networks and maximizing the revenue of the required auction of the 2155 MHz—2180 

MHz band. 

Access to Networks 

Competitive carriers also need access to other providers’ networks to offer a nationwide, interconnected service to consumers. The FCC should make it clear that 

the technology neutral interconnection requirements of the 1996 Telecommunications Act to provide wholesale connectivity to other facilities-based carriers remains intact. Most competitive carriers lack a national footprint, so their customers 

must roam on other compatible networks to receive service when outside their provider’s service area. Moreover, in order to complete calls to the customers of other 

providers, carriers must be able to interconnect with those other providers’ networks. AT&T and Verizon control (or are affiliated with) ubiquitous wireless and 

wireline networks, and naturally play a dominant role in the market for voice and 

data roaming, as well as in the provision of interconnection. Preserving access to 

these key network-related inputs is critical to competition, as it enables competitive 

carriers to provide a service of similar scale and functionality to the service offered 

by AT&T and Verizon, regardless of the type of technology used to transmit traffic. 

On the roaming front, CCA and its members were pleased by the FCC’s adoption 

of rules requiring wireless carriers to offer data roaming on fair and reasonable 

terms, and by the D.C. Circuit’s decision to uphold those rules against a challenge 

by Verizon. But as the FCC’s latest competition report acknowledges, ‘‘the ability 

to negotiate data roaming agreements on non-discriminatory terms and at reasonVerDate Nov 24 2008 06:36 Apr 03, 2014 Jkt 075679 PO 00000 Frm 00021 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\87341.TXT JACKIE
18 

11 16th Wireless Competition Report ¶ 210. 12 Connecting America: The National Broadband Plan, at 49 (2010), available at http:// 

download.broadband.gov/plan/national-broadband-plan.pdf. 13 16th Wireless Competition Report ¶ 2. 14See Andrew Ross Sorkin, Justice Department Said to Weigh Telecom Inquiry, N.Y. TIMES, Jul. 7, 2009, available at http://dealbook.nytimes.com/2009/07/07/justice-deptartment-eyeingtelecom-probe-report-says/. 

able rates remains a concern.’’ 11 Our members have found it particularly difficult 

to negotiate for roaming when they cannot discern whether the terms and conditions 

offered by the Twin Bells are in line with those offered to other carriers. The FCC 

must continue to address whether roaming agreements offered in the market are 

fair and economically sustainable and continue efforts to encourage access to roaming for competitive carriers and consumers who expect their call to always go 

through. 

The FCC also should protect the ability of competitive carriers to interconnect 

with the wireline networks of the large landline incumbents. As the FCC said in 

its National Broadband Plan, ‘‘[b]asic interconnection regulations. . .have been a 

central tenet of telecommunications regulatory policy for over a century,’’ and ‘‘[f]or 

competition to thrive, the principle of interconnection. . .needs to be maintained.’’ 12

AT&T, however, apparently does not share this view. Its wireline affiliate recently 

asked the FCC to waive statutory interconnection obligations in areas where the 

carrier upgrades to Internet Protocol (or ‘‘IP’’) technology. But there is no basis to 

abandon these bedrock competitive protections just because of a change in technology. Quite the contrary—the interconnection mandates in Section 251 are technology-neutral, as the FCC has repeatedly stated. The FCC should reaffirm this 

broadly supported principle as the industry transitions to IP, and enable competitive 

carriers to interconnect with these next-generation telecommunications networks. 

Access to Devices 

Another critical input for competitive carriers is access to the handsets and other 

devices. The FCC has recognized that ‘‘[h]andsets and devices are a central part of 

consumers’ mobile wireless experience, and a key way by which providers differentiate their offerings.’’ 13 For years, the largest carriers used exclusivity agreements 

with major device manufacturers to gain an edge over competitive carriers. AT&T 

was particularly successful at securing exclusive rights over popular handsets, most 

notably the iPhone. Only after DOJ opened an investigation into handset exclusivity 

agreements—with the AT&T/iPhone arrangement reportedly ‘‘at the center’’ of the 

inquiry 14—did Verizon begrudgingly allow other carriers to offer these formerly exclusive handsets. So, more recently, the Twin Bells have pursued other strategies 

to frustrate competitive carriers’ access to devices. 

For example, AT&T has prevented the development of interoperable devices in the 

Lower 700 MHz band—that is, devices that operate in the B Block and C Block held 

by AT&T, as well as in the Lower A Block held by CCA’s members. Post auction, 

private band plans were created that were not contemplated or included in the band 

plan presented the FCC leading up to the auction. Device interoperability is a prerequisite to a well-functioning wireless marketplace; it encourages innovation, gives 

consumers more choices, and reduces costs to end users. Interoperability also makes 

roaming technologically possible; non-interoperable devices simply cannot roam on 

other carriers’ networks. But AT&T’s efforts to bifurcate the Lower 700 MHz band— 

and to force manufacturers to develop devices that operate only on its portion of the 

band—have stymied device interoperability. Without a device ecosystem for the 

Lower A Block, 12 MHz of broadband-capable spectrum has been orphaned, the 

nearly $2 billion dollar investment made by CCA’s members in that spectrum is in 

many respects stranded, and competitive carriers must wait on the sidelines while 

the two largest carriers enjoy a head start on deploying 4G LTE on 700 MHz spectrum throughout the country. CCA has urged the FCC to address these issues by 

restoring interoperability in the Lower 700 MHz band—just as has been the practice 

in every other spectrum band designated for wireless telecommunications services 

since the early 1980s. Thorough economic analysis demonstrates the low costs and 

great rewards of interoperability, and real world technical tests have shown no impact on customer experience by moving to an interoperable Lower 700 MHz band. 

The FCC must take action on this matter in the near future to avoid further damage to wireless competition. 

Not only will a clear pathway to 4G using 700 MHz spectrum expand mobile services, it will also provide critical partnership opportunities for the forthcoming First 

Responder Network Authority (FirstNet) public safety broadband network. The 

same rural and regional carriers that have struggled to gain access to the interoperable devices needed to deploy 4G LTE mobile broadband networks are the carriers 

19 

15White House, ‘‘It’s Time to Legalize Cell Phone Unlocking,’’ Mar. 4, 2013, available at 

https://petitions.whitehouse.gov/petition/make-unlocking-cell-phones-legal/1g9KhZG7. 16FCC, ‘‘Statement from FCC Chairman Julius Genachowski on the Copyright Office of the 

Library of Congress Position on DMCA and Unlocking New Cell Phones,’’ Mar. 4, 2013, available at http://transition.fcc.gov/DailylReleases/DailylBusiness/2013/db0304/DOC319250A1.pdf. 

that currently provide service in rural and remote areas. Restoring interoperability 

and unlocking deployment in these areas creates new opportunities for FirstNet to 

leverage private investment and expand services for first responders throughout the 

nation—particularly in rural areas. 

The largest carriers have also tried to frustrate device access by selling ‘‘locked’’ 

handsets that cannot be used once a subscriber has changed providers. While these 

handsets can be ‘‘unlocked,’’ the Copyright Office recently permitted the unlocking 

exemption under the Digital Millennium Copyright Act to expire. This exemption allowed subscribers to unlock their devices without fear of violating copyright law. 

The decision was hugely unpopular with consumers, including over 100,000 of whom 

petitioned the White House in an effort to reinstate the exemption. The White 

House responded with a sharp rebuke for the Copyright Office’s decision, explaining 

that ‘‘consumers should be able to unlock their cell phones without risking criminal 

or other penalties,’’ and that unlocking is ‘‘important for ensuring we continue to 

have the vibrant, competitive wireless market that delivers innovative products and 

solid service to meet consumers’ needs.’’ 15 FCC Chairman Genachowski likewise 

recognized that a ban on unlocking ‘‘raises serious competition and innovation concerns.’’ 16 I commend Members of Congress, including Members of this Committee, 

who have led the charge for legislation to allow consumers to unlock devices, and 

urge you to swiftly advance and enact such legislation. 

Universal Service Fund 

It should also be noted that despite years of expansion of mobile services in rural 

America through access to the Universal Service Fund, as well as consumers’ clear 

preference for mobility, the FCC, in its recent reform Order, dramatically reduced 

the amount of funding for mobile broadband. While wireless carriers’ contributions 

make up a significant portion of the Fund, only a small portion is used to deploy 

mobile broadband networks in rural parts of the country. As a result of this shortsighted policy decision, your rural constituents may not have access to the latest 

mobile broadband networks they desire. Future oversight should truly modernize 

the Fund by supporting consumer preferences and technologically-neutral and costefficient solutions. The FCC, through its administration of the Universal Service 

Fund, should not choose winners and losers among technologies and businesses. 

Conclusion 

In the end, policymakers have a fundamental choice to make. You can either act 

now to create a competitive framework in the marketplace to restore competition 

and all its benefits to the wireless industry, or act later, once the Twin Bells have 

solidified their duopoly, attempting to replicate those benefits through utility-style 

regulation. I submit that the first approach is the far better one, not just for competitive carriers, but consumers, job creation, innovation, and economic growth as 

well. Prompt action to preserve access to key inputs like spectrum, networks, and 

devices will allow wireless competition to flourish, leading to more choices for consumers, lower retail prices, better service, and greater innovation. 

Thank you again for the opportunity to testify today, and I welcome your questions. 

Senator PRYOR. Thank you. 

Mr. Webster. 

STATEMENT OF DOUG WEBSTER, VICE PRESIDENT, SERVICE 

PROVIDER ROUTING, MOBILITY AND VIDEO MARKETING, 

CISCO SYSTEMS, INC. 

Mr. WEBSTER. Good afternoon, and thank you for the opportunity 

to appear before you today. Mr. Chairman and members of the 

Committee, we are in the midst of an absolute avalanche of mobile 

data. 

I’m here representing Cisco Systems, the world leading networking company, which has unparalleled insight to network data 

20 

traffic. Every year, we, at Cisco, comb through the data, looking for 

emerging trends, and share our forecast and predictions through 

our annual Visual and Networking Index, or VNI. 

In our latest forecast, Cisco predicts that, in 2017, mobile data 

in the United States will be 687 times greater than it was in 2007. 

Think of that: 687 times the volume of mobile data traffic, compared to just 6 years ago. And the growth shows no sign of abating. 

Five years from now, there will be nine times as much mobile 

data traffic in the U.S. than there is today. More e-mail, more 

apps, and especially more video, which, by 2017, will represent 

two-thirds of all the mobile data traffic. 

The question is, are we prepared for this avalanche? Can our 

current network infrastructure handle the massive growth that is 

coming? And the answer, of course, is no. 

Imagine the Washington Beltway at rush hour. That’s, basically, 

the wireless networks today. Sometimes open road, but frequently 

congested, especially at peak hours. Now imagine adding 50 percent more traffic to the Beltway each year for the next 5 years, a 

ninefold increase. You would get grinding gridlock with major 

delays, frustration, anger, and a major loss of productivity. Mr. 

Chairman, that’s precisely what will happen if Congress and the 

FCC don’t act to address the looming spectrum crunch. 

Now, how did we get to this point? Just a few years ago, mobile 

data traffic was at relatively low levels, the product of a handful 

of text messages, mostly by our teenagers. Fast forward to a few 

years later, however, each of us has multiple mobile devices continuously wirelessly connected to the Internet: smartphones, tablets, laptops, video streaming devices, smart TVs, and gaming consoles, to name just a few. And the devices will continue to proliferate. In just a few years, we forecast that there will be eight devices for every American. Not only do we send e-mail and text messages constantly, but we’re watching massive amounts of video, 

from our children’s first steps to entire feature-length movies on 

hand-held devices. 

Last week, Cisco released our latest VNI forecast, and the hard 

data show there is simply no stopping the growth. We’ve become 

attached to our mobile devices and have integrated them into our 

daily lives. 

So, what should policymakers do now to ensure that we have the 

infrastructure and investment in place to meet this demand? Put 

simply, more licensed and unlicensed spectrum must be allocated 

for broadband access. To return to our Beltway metaphor, adding 

spectrum will add more lanes for traffic, widen lanes that, today, 

are too narrow, and create more on-ramp/off-ramps and feeder 

roads to reduce bottlenecks. Congress’s authorization of voluntary 

incentive spectrum auctions in 2010 was a critical first step on the 

licensed side of the equation. And, on behalf of Cisco, I want to 

thank you for taking that meaningful action. 

Now, thanks to this committee, the FCC is setting potential expansion of Wi-Fi in the 5 gigahertz band. The FCC is conducting 

an analysis of whether additional sharing for commercial purposes 

is technically feasible. We hope that this analysis can be completed 

as quickly and thoroughly as possible to help increase broadband 

speed and adoption. This is increasingly important, given that apVerDate Nov 24 2008 06:36 Apr 03, 2014 Jkt 075679 PO 00000 Frm 00024 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\87341.TXT JACKIE
21 

proximately 50 percent of all data moves over Wi-Fi or mobile networks, and given that Wi-Fi helps alleviate the pressure on the licensed cellular networks. 

The bottom line is this. The mobile revolution is here. It’s changing the way we communicate, the way we analyze data, the way 

healthcare, education, government, and public-safety services are 

delivered, and it’s creating new American jobs and economic growth 

every day. 

As if you need more reason to act, studies show that doubling 

mobile data results in a half-a-percent increase in the Nation’s 

gross domestic product, growth which is necessary now more than 

ever. It’s imperative that we address the looming spectrum crunch 

here in the United States and allow providers to invest private dollars in network infrastructure. This will help ensure that the 

United States remains at the cutting edge and continues to be a 

global leader when it comes to mobile technologies. 

Thank you again for the opportunity to appear today, and I look 

forward to your questions. 

[The prepared statement of Mr. Webster follows:] 

PREPARED STATEMENT OF DOUG WEBSTER, VICE PRESIDENT, SERVICE PROVIDER

ROUTING, MOBILITY AND VIDEO MARKETING, CISCO SYSTEMS, INC. 

Just a few years ago, mobile data traffic was at relatively small levels, the product a handful of text messages, mostly by our teenagers, some e-mail, and rudimentary web browsing. Fast forward a few years later, however, and the mobile 

landscape has changed, dramatically. 

Many of us have multiple mobile devices—whether smartphones, tablets, or 

laptops, not to mention the increasing number of machine-to-machine mobile devices 

that work in the background of our daily lives. Not only do we send e-mail and text 

messages constantly, but we’re watching large amounts of video—from short clips 

of our children’s first steps to entire feature-length movies to real time video calling 

and video conferencing. 

Taken as a whole, this change has transformed mobile traffic, with profound implications for policy. 

At Cisco—the worldwide leader in networking technology for the Internet—we’ve 

been measuring these changes since 2006 through our Visual Networking Index. 

Our forecasts have been used by government, analysts, the media, academics, and 

providers to analyze the use and growth of Internet Protocol—or IP—networks 

worldwide. Last week, Cisco released its annual Visual Networking Index Forecast, 

encompassing the mobile traffic forecast that we published in February as well as 

a look at traffic growth for all types of IP traffic. While the findings may seem eyepopping, if history is a guide, they may very well be conservative. Cisco’s VNI has 

consistently under-projected actual traffic levels by around 10 percent. 

When you look at the numbers, it is readily apparent that mobile data has become 

an indispensable part of our lives, as evidenced by the findings of the Cisco Visual 

Networking Index: 

• In 2012, U.S. mobile data traffic grew 62 percent in a single year. 

• Looking forward, from 2012 to 2017, U.S. mobile data traffic will grow nearly 

nine times, from 2.4 exabytes to 23.2 exabytes annually. To get to those volumes, traffic will have to grow an average of 56 percent each year of the five 

year forecast. If the term ‘‘exabyte’’ is not familiar to you, 23.2 exabytes is the 

equivalent of nearly 6 billion DVD movies transmitted across mobile networks. 

• The incremental growth in mobile data traffic added to the network in a single 

year from 2014 to 2015 will be larger than all the traffic that was carried on 

U.S. mobile networks in 2012. 

• By 2017, Americans will use 1.1 billion mobile and portable devices, all employing licensed or unlicensed radio spectrum, and will use those devices to generate 70 percent of U.S. Internet traffic. The Internet has gone mobile. 

22 

Four factors are driving this rapid growth of mobile traffic on the Internet: 

(1) The number of users and connections to mobile networks is dramatically increasing. There will be 726 million mobile connections in the U.S. in 2017, 

up from 439 million in 2012, nearly 2-fold growth. That device total means 

there will be 2.3 devices in use for every person in the US. In addition, to 

multiple devices per person, mobile broadband will also support machine to 

machine connections—connecting not just people, but things. These machine 

to machine connections will be deployed into a wide variety of sectors—from 

energy supporting smart home energy meters as well as transmission and 

distribution networks, public safety supporting sensor networks and mobile 

video imaging, to healthcare such as home healthcare services. The number 

of these M2M connections will grow 4.6-fold between 2012 and 2017, reaching 323 million. And there will be more users. There will be 286 million mobile users in 2017, 50 million more than in 2012. 

(2) The types of devices being used to connect is advancing with the rising 

adoption of ever more powerful smartphones and tablets that consume more 

data. We are entering the era of smartphones, which dominate the device 

types that consumers will use. A smartphone generates 28x more mobile 

data traffic per month than a basic handset and by 2017, smartphones will 

be 52 percent of total mobile data traffic. The average smartphone today 

uses nearly 600 megabits of traffic per month. By 2017, the device manufacturers will be selling even more powerful 4G smartphones that we project 

will generate over 5 gigabits per month. They will be smarter, faster, more 

fun, and there will be many more things that consumers do with their 

smartphones than we do today. 

(3) Mobile data networks themselves are getting faster due to investment and 

new technology—the average mobile connection speed in the U.S. will grow 

6-fold between 2012 and 2017, reaching 14.4 Mbps in 2017. While 3G connections remain the dominant way in which most of us connect to the mobile data networks, faster 4G networks will represent almost one-third of 

mobile connections by 2017. Significantly, that one-third of 4G connections 

will be responsible for generating almost two-thirds of the mobile data traffic. 

(4) Video in many forms will represent two-thirds of all mobile traffic by 2017. 

From YouTube, to video embedded in advertisements, to viewing video programming, to video ‘‘calls,’’ the consumption of video on mobile networks is 

skyrocketing. Mobile video traffic will grow 11-fold from 2012 to 2017, a 

compound annual growth rate of 63 percent. That amount of video has an 

enormous impact on data traffic volume, as it takes a lot of data to generate 

a moving, full color, crystal clear image on a screen. In 2012, the average 

user was generating 763 megabits of mobile data per month, which meant 

the average user last year consumed about 2 hours of video and made 2 

video calls per month. By 2017, the average user will be consuming 6 gigabits a month—nearly eight times the 2012 levels. To generate that demand, 

we forecast that the average user will be using about 18 hours of video and 

making 10 video calls per month. 

Meeting the challenges created by this massive demand requires at least two simultaneous approaches. 

One obvious policy initiative is to find more spectrum. Congress led the way last 

year with adoption of HR 3630, creating for the first time voluntary incentive auction authority that will allow the Federal Communications Commission (FCC) to repurpose part of the television broadcast spectrum for mobile broadband. The bill 

also extended the FCC’s regular auction authority and made important improvements to the Commercial Spectrum Enhancement Act governing the transition of 

Federal spectrum to commercial use. Congress now needs to ensure that the FCC 

follows through on its grant of auction authority by conducting the voluntary incentive auction for broadcast spectrum as soon as possible. 

The National Telecommunications and Information Administration (NTIA) is also 

continuing its efforts to identify Federal spectrum that can be repurposed to commercial use, with particular emphasis on the 1755–1850 MHz band that, in many 

countries of the world, is in use for cellular systems. Your attention to the NTIA 

process and progress in its talks with industry is important. 

In addition, Congress has also asked the FCC to take a look at whether additional 

spectrum for Wi-Fi could be made available at 5 GHz. This is a very important initiative because, in addition to the exploding use of Wi-Fi, Wi-Fi networks are increasingly being used by carriers and consumers to offload mobile traffic. Our VNI 

23 

report this year indicates the trend is increasing, as carriers will increasingly embrace a solution to push their customers to Wi-Fi where possible to avoid congestion 

on macrocell networks. By 2017, two thirds of mobile traffic will be offloaded to 

small cell networks, predominantly Wi-Fi. That compares to about half the traffic 

today. 

We appreciate this committee’s interest in, and attention to, the profound changes 

now taking place in the mobile broadband industry. Our nation is the leader in mobile broadband. The wireless revolution spurs the construction of new high speed 

wireless networks. It drives the manufacturing of chips, routers, network equipment, and mobile devices such as smartphones, laptops, and tablets. It creates business and consumer software, the development of app stores, and substantial growth 

in electronic commerce. 

Mobility has been an important driver of jobs and economic growth, and it has 

the potential to generate hundreds of thousands more jobs if the Federal government acts promptly to ensure that additional spectrum is made available to fuel future mobile broadband growth. It’s important that the Congress understand the dynamic growth occurring in this industry, and why public policy is critical to that 

growth. This Committee provides an excellent platform for making these connections more obvious to all. 

We thank you for your attention to this highly dynamic and important industry, 

which continues to be a particularly bright spot in the Nation’s economy. We invite 

you to access the latest Cisco data for the U.S. and the world anytime at 

www.cisco.com/go/vni. 

Senator PRYOR. Thank you. 

Mr. Nagel. 

STATEMENT OF THOMAS F. NAGEL, SENIOR VICE PRESIDENT, 

COMCAST CORPORATION 

Mr. NAGEL. Mr. Chairman, members of the Subcommittee, thank 

you for the opportunity to testify today. 

I’ve been at Comcast for over 10 years, and one of my primary 

responsibilities has been the strategic development of Comcast’s 

wireless efforts. During that time, unlicensed services, such as WiFi, have grown from an in-home extension of a wired broadband to 

a central component of the wireless ecosystem and an important 

means of communication during emergencies. 

I am pleased to talk about the many benefits of Wi-Fi as well as 

the policy steps needed to ensure that unlicensed services continue 

to serve as a platform for innovation, investment, and economic 

growth. 

Comcast operates a Wi-Fi network that has expanded elevenfold 

in 18 months, from 5,000 access points last year to over 55,000 access points today. We also have partnered with other cable operators to build one of the country’s largest Wi-Fi networks, with over 

150,000 access points, and many more to come. 

Because of these efforts, our customers can use any Wi-Fiequipped device to enjoy, at high speed, wireless Internet services 

in many locations throughout the country. Our experience with WiFi confirms the important role unlicensed services play in the wireless ecosystem. Consumers increasingly use Wi-Fi networks for 

cost-effective and robust wireless access to the Internet, making 

unlicensed spectrum a key complement to licensed wireless technologies. In fact, the CEO of Cisco recently stated that Wi-Fi will 

eventually carry 80 to 90 percent of the growth of cellular networks, and various studies confirm that unlicensed services contribute tens of billions of dollars in economic value each and every 

year. 

24 

Importantly, our Wi-Fi network has also proven to be particularly valuable during times of emergency. In the aftermath of Hurricane Sandy and Winter Storm Nemo and the tragic attack at the 

Boston Marathon, commercial mobile wireless networks were temporarily overloaded or, at times, down completely. In each instance, 

Comcast was able to open its Wi-Fi network and provide free access to anyone with a Wi-Fi-enabled device so that people could receive urgent information and establish communications with loved 

ones. Because of the rapid expansion of Wi-Fi-enabled devices, WiFi networks like the one we operate are invaluable. They allow consumers to communicate and stay connected during emergencies, regardless of their wireless carrier. In a sense, Wi-Fi has become the 

interoperable communications standard for consumers. 

Looking ahead, we must ensure that there is sufficient unlicensed spectrum to meet the growing consumer demand. The spectrum used to deliver Wi-Fi today has become severely congested, 

especially in densely populated areas. The result is significantly reduced Wi-Fi performance. If we fail to provide more spectrum for 

unlicensed services, we risk falling behind other nations that are 

preparing for next-generation Wi-Fi, often called ‘‘gigabit Wi-Fi’’ because of its potential to offer dramatically improved speeds. 

To address these challenges, policymakers should begin by removing unnecessary regulatory barriers that prevent more efficient 

spectrum-sharing in the 5 gigahertz band. The current operating 

rules undermine the ability to fully utilize the spectrum to deliver 

robust unlicensed services and next-generation Wi-Fi. 

Congress, the administration, and the FCC already have taken 

several concrete steps toward ensuring that unlicensed services 

continue to thrive. In particular, Comcast commends Congress for 

passing the landmark Spectrum Act of 2012, which took significant 

steps toward addressing the challenges facing both licensed and 

unlicensed services, including provisions that pave the way for 

identifying new spectrum that unlicensed services can share with 

existing users. Additionally, we support the FCC’s efforts in the recently initiated 5 gigahertz proceeding. This proceeding will be critical to the development of next-generation Wi-Fi. The 5 gigahertz 

band presents the best chance for the FCC to advance the administration’s spectrum-sharing policies. Under the proposal set forth by 

the FCC, unlicensed services will be able to share the spectrum 

without causing harmful interference to existing users, maximizing 

the value of spectrum for all Americans. 

As Congress considers the state of the wireless ecosystem, it 

must ensure that this nation has a balanced spectrum policy that 

promotes both licensed and unlicensed uses of spectrum. Unlicensed services offer enormous economic and social benefits, and 

Comcast is prepared to continue to invest to help America enjoy 

those benefits. We are committed to working with Congress, the 

administration, the FCC, and other stakeholders to reach solutions 

that will maximize the value of unlicensed services to this Nation. 

Thank you for the opportunity to testify today. I look forward to 

answering your questions. 

[The prepared statement of Mr. Nagel follows:] 

25 

PREPARED STATEMENT OF THOMAS F. NAGEL, SENIOR VICE PRESIDENT, COMCAST CORPORATION

Mr. Chairman and Members of the Subcommittee: 

Thank you for inviting me to testify today on the state of wireless communications. I am the Senior Vice President of Business Development and Strategy for 

Communications and Data Services at Comcast Corporation (‘‘Comcast’’), where I 

have worked since 2002. In my current role, I am responsible for leading the strategic development of Comcast’s wireless services. 

I welcome the opportunity to discuss the enormous potential for the continued 

growth of wireless services, and in particular unlicensed services such as Wi-Fi. At 

Comcast, we believe unlicensed spectrum is an essential input to technological innovation, investment, and economic growth. Only with access to enough unlicensed 

spectrum will industry be able to meet consumer demand for wireless data services. 

In addition, the importance of robust, widely available unlicensed networks has 

been made abundantly clear over the past 12 months, when Wi-Fi networks played 

an important role in facilitating communications in the aftermath of Hurricane 

Sandy, Winter Storm Nemo, and the horrific attack at the Boston Marathon. We 

commend Congress, the Administration, and the Federal Communications Commission (‘‘FCC’’) for already taking several concrete steps toward developing solutions 

that would ensure unlicensed services will continue to thrive as an essential part 

of the wireless ecosystem, and we are committed to working with policymakers to 

achieve these solutions. I want to emphasize, however, that time is of the essence. 

Without action in the near term, Wi-Fi networks will not have access to the spectrum they need to provide the kind of services that consumers have come to expect. 

Comcast has been active in the wireless marketplace for many years. We have 

long recognized that a robust wireless complement to our existing broadband services would enable us to extend our network and offer more value, more flexibility, 

and more options to our customers. Over the years, we have explored a variety of 

approaches to effectively integrate wireless services into our business model. 

Today, I would like to discuss our innovative strategy to provide broadband services to our customers outside the home using our Wi-Fi network to deliver wireless 

services that operate over unlicensed spectrum bands. For over a decade, our residential and business customers have used Wi-Fi routers to extend high-speed Internet access throughout their homes and offices. Recently, we have deployed a network of tens of thousands of Xfinity WiFi access points throughout many portions 

of our footprint, accessible for no additional charge to qualified Comcast residential 

and business broadband customers via any Wi-Fi-enabled device. And we are 

partnering with other cable companies to build one of the country’s largest networks 

of Wi-Fi access points, which in less than two years already includes over 150,000 

access points around the country. This substantial investment allows us to successfully extend our existing network in ways that make it more flexible, more interoperable, and more convenient for our customers. But it all depends on access to 

adequate unlicensed spectrum resources. 

Our experience confirms that unlicensed technologies: (1) are a central component 

of the wireless ecosystem; (2) are among the most popular methods used by consumers to access the Internet; (3) contribute tens of billions of dollars of value to 

the Nation’s economy every year; and (4) can serve as critical sources of connectivity 

in times of crisis, when licensed wireless networks often cannot support heavy traffic loads or are otherwise unavailable. Americans’ demand for data services continues to grow, regardless of whether they are at home or on the go, and unlicensed 

services like Wi-Fi play a key role in meeting that demand. Our nation’s spectrum 

policy must reflect this reality by taking a balanced approach that focuses not only 

on spectrum for licensed services, but also on taking the necessary steps to address 

the current and future challenges to the continued growth of unlicensed services. 

A core challenge is that the primary Wi-Fi spectrum band—the 2.4 GHz band— 

has become highly congested, especially in densely populated urban areas, making 

it harder to deliver the wireless broadband services that consumers and businesses 

expect. Solving this problem requires a balanced approach whereby the FCC allocates additional spectrum across a number of different bands for unlicensed use and 

removes regulatory roadblocks that limit the efficient use of unlicensed spectrum, 

such as unnecessary indoor-only restrictions, power limitations, and other technical 

requirements and restrictions. 

As policymakers work toward this goal, it is important to recognize that supporting unlicensed technologies does not mean undermining licensed technologies. 

Quite the opposite is true. Licensed and unlicensed services have co-existed and 

complemented each other for many years. In fact, allocating additional spectrum for 

unlicensed use will substantially enhance the value of licensed wireless services by 

26 

1The unlicensed model reduces regulatory and economic barriers to use of the spectrum, 

thereby ‘‘encouraging a deluge of technological and business model innovation’’ and turning unlicensed spectrum ‘‘into the most economically productive radio spectrum in the world.’’ Richard 

Thanki, The Power of the Unlicensed Economy, AllThingsD, July 10, 2012, available at http:// 

allthingsd.com/20120710/the-power-of-the-unlicensed-economy/ (‘‘Thanki 2012 Paper’’). 2See, e.g., Presidential Memorandum: Unleashing the Wireless Broadband Revolution 

(June 28, 2010) (ordering the Secretary of Commerce to make spectrum available for, inter alia, 

‘‘shared access by commercial and Government users in order to enable licensed or unlicensed 

wireless broadband technologies to be deployed.’’) (emphasis added), available at http:// 

www.whitehouse.gov/the-press-office/presidential-memorandum-unleashing-wireless-broadbandrevolution; Press Release, Energy & Commerce Comm., U.S. House of Representatives, Walden, 

Latta Welcome Progress on Efforts to Increase Unlicensed Spectrum (Jan. 10, 2013), available 

at http://energycommerce.house.gov/press-release/walden-latta-welcome-progress-efforts-increase 

-unlicensed-spectrum; Press Release, FCC, Statement from FCC Chairman Julius Genachowski 

on House Passage of Voluntary Incentive Auction Legislation (Dec. 13, 2011) (‘‘Unlicensed spectrum stimulates innovation, investment, and job creation in many ways, including by providing 

start-ups with quick access to a testbed for spectrum that is used by millions, bringing new technologies to consumers in a rapid fashion.’’); Unlicensed Operation in the TV Broadcast Bands, 

Second Report and Order and Memorandum Opinion and Order, 23 FCC Rcd. 16807 (2008) 

(Statement of Commissioner Robert McDowell) (‘‘Robust unlicensed use of white spaces will give 

nimble entrepreneurs the freedom to disrupt the market in positive and constructive ways that 

will force incumbents to keep pace with this new revolution.’’). 3See, e.g., Comments of Motorola Solutions, Inc., ET Docket No. 13–49, at 8 (May 28, 2013) 

(‘‘There is a well-documented need for additional wireless broadband spectrum, and unlicensed 

spectrum in particular is a key driver of innovation and economic development.’’); Comments 

of Time Warner Cable, Inc., ET Docket No. 13–49, at 4 (May 28, 2013) (‘‘TWC believes that a 

robust Wi-Fi capability provides an important complement to its existing wireline broadband 

network to enable its subscribers to access the Internet anywhere, anytime, on any device.’’); 

Reply Comments of Sprint Nextel Corp., WT Docket No. 12–4, at 10 (Mar. 26, 2012) (‘‘Wi-Fi 

networks that are easily—even seamlessly—accessible by customers of wireless carriers can provide users with advantages of higher-speed connections without wireless data limits.’’); Joint 

Comments of Google, Inc. & Microsoft, Inc., GN Docket No. 12–268, at 1 (Jan. 25, 2013) 

(‘‘[B]usinesses depend on access to robust licensed services as well as access to robust unlicensed 

spectrum resources. One without the other simply will not allow U.S. businesses to meet accelerating consumer demand for wireless products and services.’’). 4See, e.g., Mark Cooper, Efficiency Gains and Consumer Benefits of Unlicensed Access to the 

Public Airwaves 7 (Jan. 2012), available at www.markcooperresearch.com/SharedSpectrum 

Analysis.pdf (‘‘The unlicensed model has succeeded in supporting a large amount of economic 

activity in the wireless broadband space by bringing new and unique services to the market, 

increasing the value of broadband service by extending it to additional devices, and providing 

a lower cost, more efficient avenue to deliver data to consumers.’’). 

helping to address the challenges associated with increased data traffic on licensed 

mobile networks. 

Congress embraced a balanced spectrum policy and took a significant step toward 

addressing the challenges facing both licensed and unlicensed wireless services 

when it passed the Middle Class Tax Relief and Job Creation Act of 2012, which 

included several provisions that paved the way for unlicensed services to share new 

spectrum bands with existing users in a way that maximizes the efficient use of 

spectrum and enhances the value of spectrum for all consumers. Comcast applauds 

Congress for passing this landmark legislation. We also appreciate the efforts of the 

FCC, which already has initiated multiple proceedings to implement Congress’s directives. In particular, the FCC in its 5 GHz proceeding proposes a number of essential improvements that would facilitate more efficient sharing of the 5 GHz spectrum band, thereby enabling the development of the next generation of unlicensed 

technologies and encouraging the deployment of robust unlicensed services. 

I. Unlicensed Spectrum Provides a Platform for Investment, Innovation, 

and Economic Growth 

Consumers today expect access to content and information anytime, anywhere, 

and via any device, and unlicensed spectrum has been a key catalyst to this revolution. The explosive growth of services and devices using unlicensed spectrum, including Wi-Fi, Bluetooth, RFID, and smart grid applications, among many others, 

has been remarkable. These services have greatly benefitted consumers, created billions of dollars of economic value, supported millions of jobs, and provided a platform for even more innovation and investment.1 Wi-Fi in particular is now an integral part of daily life and a service upon which consumers and businesses—including mobile network operators—increasingly rely for cost-effective and robust wireless broadband access to the Internet. In light of the extremely positive economic 

and societal effects of unlicensed services, it is no surprise that there is widespread 

consensus among policymakers,2 industry,3 and other interested parties 4 that unlicensed services must continue to be a component of wired and wireless broadband 

27 

5See generally CableWiFiTM, http://www.cablewifi.com/ (last visited May 31, 2013). 6Press Release, Comcast Corp., Xfinity WiFi Now at Citizens Bank Park, (Mar. 18, 2013), 

http://corporate.comcast.com/comcast-voices/xfinity-wifi-now-at-citizens-bank-park. 7Paul Milgrom et al., The Case for Unlicensed Spectrum ¶ 42 (Oct. 12, 2011), available at 

www.stanford.edu/∼jdlevin/Papers/UnlicensedSpectrum.pdf. 8 Richard Thanki, The Economic Value Generated by Current and Future Allocations of Unlicensed Spectrum, Final Report, Perspective Associates 35 (Sept. 28, 2009), available at http:// 

spectrumbridge.com/Libraries/WhitelSpacelPrimer/whitespaces-microsoft-study.sflb.ashx. 9 Id. at 42. 10See, e.g., Revision of Part 15 of the Commission’s Rules to Permit Unlicensed National Information Infrastructure (U–NII) Devices in the 5 GHz Band, Notice of Proposed Rulemaking, 28 

FCC Rcd. 1769 (2013) (Statement of Commissioner Mignon Clyburn). 

Internet access services. Comcast has first-hand experience with the tremendous 

value these services offer to consumers. 

A. Comcast’s Xfinity WiFi Service Uses Unlicensed Spectrum to Deliver Fast, 

Reliable Wireless Broadband Access 

Comcast’s residential and business customers have long used Wi-Fi routers in 

their homes and businesses to enhance the value of their wired high-speed Internet 

service. Over the last few years, Comcast has invested significant time, energy, and 

human and capital resources to bring that experience outside the home by deploying 

a robust Wi-Fi network that enables our customers to enjoy wireless Internet access 

on the go. Today, Comcast makes Xfinity WiFi available in several cities throughout 

the country for any consumer to access on a pay-per-use basis, and access is included for no additional charge for qualifying customers who have an Xfinity Internet or Comcast Business Internet subscription. 

Comcast’s efforts are really only beginning. In 2012, we expanded the Xfinity WiFi 

network from approximately 5,000 access points to more than 25,000 access points. 

So far this year, that number has increased to over 55,000 access points as we have 

ramped up the deployment of our network, enhancing the service in existing areas 

and expanding into several new regions. In fact, in the last two weeks we have expanded the Xfinity WiFi network to include hundreds of new access points in Chicago and Atlanta. And through our CableWiFi partnership with other cable operators, our customers have access to over 150,000 Wi-Fi access points throughout the 

country for no additional charge.5

We install these access points in a variety of locations that we determine will best 

serve our customers’ needs. In addition to deploying Wi-Fi networks in retail locations, Comcast is building an extensive outdoor network to provide wireless 

broadband service in high-traffic areas, such as main street districts, commuter rail 

stations, parks, and other public areas. Xfinity WiFi deployments also serve large, 

high-traffic venues, such as malls, transportation centers, and sports stadiums. For 

example, Comcast recently made Xfinity WiFi available at Citizens Bank Park in 

Philadelphia as an amenity for no additional fee to any guest with a Wi-Fi-enabled 

device.6

Usage of Xfinity WiFi has grown dramatically as we have expanded its footprint. 

There are now more users of the Xfinity WiFi service than ever before, and they 

are doing more, more often, with more devices, for longer. Comcast now records as 

many Wi-Fi user sessions in one month as it did in the first two-and-a-half years 

of the Xfinity WiFi project. 

B. Unlicensed Services Create Significant Value, Including to Mobile and Fixed 

Broadband Services 

Comcast’s experience is consistent with the growing body of data showing that unlicensed services create huge benefits both for broadband providers and their customers, and support significant growth in the economy as a whole. 

According to a 2012 study, ‘‘a variety of approaches all point toward economic benefits [from unlicensed technologies] at least in the tens of billions of dollars a year.’’ 7

Additionally, a 2009 study that used consumer survey data to derive the incremental demand for broadband services attributable to Wi-Fi estimated that ‘‘Wi-Fi 

usage in the home, for only the purpose of broadband extension, may be generating 

anywhere between $4.3 and $12.6 billion in annual economic value for consumers 

in the United States.’’ 8 And the value of in-home Wi-Fi, hospital Wi-Fi, and RFID 

tags ‘‘together may generate $16–37 billion per year in economic value for the U.S. 

economy over the next 15 years.’’ 9 By some accounts, unlicensed services contribute 

upwards of $50 billion in annual economic growth.10

Unlicensed spectrum also adds value as a key complement to licensed wireless 

technologies, particularly as part of the solution to the rising demand for licensed 

spectrum caused by increased mobile wireless broadband traffic. According to Cisco, 

28 

11See Cisco, Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 

2012–2017, at 1 (Feb. 6, 2013) (‘‘2013 Cisco Forecast’’), http://www.cisco.com/en/US/solutions/ 

collateral/ns341/ns525/ns537/ns705/ns827/whitelpaperlc11-520862.pdf. 12See id. at 3. 13 Comments of Sprint Nextel Corp., WT Docket No. 12–4, at 5 (Feb. 21, 2012); see also Comments of Ericsson, ET Docket No. 13–49, at 2 (May 28, 2013) (discussing importance of technologies that ‘‘enable mobile operators to deliver supplemental small cell or stand-alone Wi-Fi’’ 

using unlicensed technologies). 14See 2013 Cisco Forecast at 3. 15Thanki 2012 Paper (emphasis added). 16See, e.g., Brendan Sasso, FCC Says Hurricane Sandy Knocked Out 25 Percent of Cell Towers 

in Its Path, The Hill (Oct. 30, 2012), available at http://thehill.com/blogs/hillicon-valley/technology/264915-fcc-hurricane-sandy-knocked-out-25-percent-of-cell-towers. 17See, e.g., Chloe Albanesius, FCC Probes Post-Bombing Cell Phone Congestion in Boston, PC 

Magazine (Apr. 17, 2013), available at http://www.pcmag.com/article2/0,2817,2417891,00.asp. 18See J.T. Ramsay, Comcast Voices Blog, Comcast Celebrates Live Streaming of the 2012 

Olympics Games Through NBCOlympics.com, Offers Free Access to Xfinity WiFi Hot Spots 

(Jul. 25, 2012), http://corporate.comcast.com/comcast-voices/comcast-celebrates-live-streamingof-the-2012-olympic-games-through-nbcolympicscom-offers-free-acces. 19See Joshua Palau, Comcast Voices Blog, Comcast Creates Lasting Memories this Memorial 

Day (May 22, 2013), http://corporate.comcast.com/comcast-voices/12542; J.T. Ramsay, Comcast 

traffic on licensed mobile wireless networks increased 70 percent last year, rising 

from 520 petabytes per month in 2011 to over 885 petabytes per month in 2012.11

Cisco expects that tremendous rate of annual growth to continue for at least the 

next four years.12 Many mobile wireless broadband providers have come to recognize 

that, to keep up with this increasing level of demand, they will need to rely on unlicensed services to carry some of the load. As Sprint has explained,’’[o]ne of the most 

effective methods of increasing the capacity of wireless data systems is moving data 

traffic, whenever possible, from the licensed spectrum of commercial mobile carriers 

to unlicensed spectrum, such as that now used for Wi-Fi.’’ 13

The beneficial impact on licensed wireless providers and their customers resulting 

from Wi-Fi is staggering. The amount of mobile data offloaded to Wi-Fi networks 

is projected to reach 21 exabytes (or 21 billion gigabytes) by 2017.14 One study concluded that, ‘‘[i]n the absence of Wi-Fi, cellular operators would need to construct 

up to 450,000 new radio base stations to serve increased smartphone data traffic. 

This could cost $93 billion—subjecting smartphone and tablet users to significantly 

higher network charges or greatly diminished service.’’ 15

There are also positive societal benefits associated with Wi-Fi services that are 

not as easily quantified, but are readily apparent. This was convincingly demonstrated by Comcast’s experience during the chaotic aftermath of Hurricane Sandy 

and Winter Storm Nemo, and after the tragic events at the Boston Marathon. In 

February, I spoke about Comcast’s experience in these situations at an FCC field 

hearing on network reliability. Following Sandy, mobile wireless service was unavailable for large portions of the affected areas.16 In the aftermath of the storm, 

Comcast made approximately 20,000 Xfinity WiFi access points in ten hard-hit 

states and the District of Columbia available to anyone who needed them to communicate with family or friends, or otherwise to get important recovery information. 

Comcast recorded more than 250,000 individual sessions during that period, supporting tens of thousands of unique users while also adding a special functionality 

to permit non-Comcast subscribers to maintain their connection without having to 

refresh their credentials. Comcast took similar steps following Winter Storm Nemo, 

which caused widespread utility outages throughout New England and the eastern 

United States, and during the week after that storm, we carried almost 7 terabytes 

of data traffic more than we do in a normal week. Likewise, in the immediate aftermath of the attacks at the Boston Marathon, commercial mobile wireless networks 

were overloaded,17 but Comcast opened its network to anyone—including nonComcast subscribers—with a Wi-Fi-enabled device to establish communications with 

loved ones, leading to significantly increased usage of our Xfinity WiFi network in 

Boston and the surrounding communities. In each instance, we opened our Wi-Fi 

network in full cooperation with federal, state, and local officials as they looked for 

ways to ease the burdens on affected individuals and public safety officials. 

Comcast has opened its Xfinity WiFi network during non-emergencies as well. For 

example, during the 2012 Summer Olympics, Comcast offered promotional access to 

thousands of indoor and outdoor access points in the greater Philadelphia area, allowing anyone with a Wi-Fi-enabled device to follow the Olympic programming from 

London.18 Comcast also is currently offering, and has offered in the past, promotional access at Xfinity WiFi access points along the New Jersey shore, enabling 

consumers to conveniently surf the Web, share photos, access social media, and 

stream music, TV, and movies.19

29 

Voices Blog, Surfing at the Shore Just Got Easier (Jul. 1, 2011), http://corporate.comcast.com/ 

comcast-voices/surfing-at-the-shore-just-got-easier. 20 ‘‘WiFi congestion will only accelerate as the number of wireless devices continues to grow. 

Without additional spectrum, wireless consumers are likely to experience reduced performance, 

threatening the future of the wireless ecosystem.’’ Dirk Grunwald & Kenneth Baker, FCC 

Broadcast Incentive Auction: A Band Plan Framework for Maximizing Spectrum Utility 11 

(2013) (attached to Reply Comments of Nat’l Cable and Telecomms. Ass’n, GN Docket No. 12– 

268 (Mar. 12, 2013)); see also Dynamic Spectrum Management, InterDigital 8 (Oct. 2012), available at http://www.interdigital.com/wp-content/uploads/2012/10/InterDigital-DSM-WhitePaperlOct2012.pdf (‘‘Wi-Fi currently operates in the unlicensed bands 2.4 and 5.0 GHz. . . . 

Wi-Fi bands are often congested, particularly in high traffic public areas.’’). 21 Revision of Part 15 of the Commission’s Rules to Permit Unlicensed National Information 

Infrastructure (U–NII) Devices in the 5 GHz Band, Notice of Proposed Rulemaking, 28 FCC Rcd. 

1769 (2013) (Statement of Commissioner Mignon Clyburn). 22 Revision of Part 15 of the Commission’s Rules to Permit Unlicensed National Information 

Infrastructure (U–NII) Devices in the 5 GHz Band, Notice of Proposed Rulemaking, 28 FCC Rcd. 

1769 (2013) (Statement of Chairman Julius Genachowski). 23 Revision of Part 15 of the Commission’s Rules to Permit Unlicensed National Information 

Infrastructure (U–NII) Devices in the 5 GHz Band, Notice of Proposed Rulemaking, 28 FCC Rcd. 

1769 (2013) (Statement of Commissioner Robert McDowell). 

During emergencies and non-emergencies alike, Wi-Fi networks offer a unique opportunity for consumers to communicate and stay connected because of the accessible nature of unlicensed spectrum and unlicensed services. Almost every mobile 

device is now equipped with a Wi-Fi radio, so almost everyone can access a Wi-Fi 

network, regardless of the identity of their underlying licensed mobile carrier. Mobile wireless providers simply cannot offer access to everyone, even if they wanted 

to, because of the closed nature of their networks and the licensed spectrum regime. 

In a sense, Wi-Fi has become the interoperable communications standard for consumers. 

II. Sound Spectrum Policy Must Be Designed to Encourage the Continued 

Growth of Unlicensed Services by Making Additional Spectrum 

Available for Unlicensed Use and by Removing Unnecessary Regulatory 

Barriers 

To meet the ever-increasing consumer demand and expectations for robust Wi-Fi 

services, all critical stakeholders must commit to address the remaining obstacles 

in a timely manner. While the benefits and importance of unlicensed services like 

Wi-Fi are clear, there are significant challenges that threaten to impair the growth 

and development of such services. 

Comcast has identified two primary objectives that policymakers must achieve to 

overcome the barriers that stand in the way of further growth and innovation in 

unlicensed services. First, the government must ensure that access to unlicensed 

spectrum grows. Second, the government must remove unnecessary regulatory barriers that impede the efficient and intensive use of existing unlicensed spectrum resources. We believe these are common sense, straightforward approaches that will 

facilitate the continued growth and vitality of the unlicensed sector and will return 

to the public significant benefits in the form of innovation, investment, and economic growth. 

A. A Shortage of Usable Spectrum Hampers the Growth of Unlicensed Services 

Comcast’s experience shows that there are several pressing issues that must be 

addressed to facilitate ongoing growth and innovation in the provision of unlicensed 

services. Chief among these concerns is the congestion of existing unlicensed bands. 

Because of this congestion, the core unlicensed spectrum band is already heavily 

saturated in many densely populated communities. Simply put, congestion in the 2.4 

GHz band will make it harder and harder for providers to deliver the kinds and 

quality of service that consumers have come to expect.20

The congestion problems in the 2.4 GHz band are well documented. Acting Chairwoman Mignon Clyburn has pointed out that the 2.4 GHz band is particularly congested in major cities.21 Former FCC Chairman Julius Genachowski observed that 

‘‘Wi-Fi congestion is a very real and growing problem.’’ 22 Furthermore, former Commissioner McDowell noted, ‘‘The spectrum that is used for unlicensed Wi-Fi is also 

experiencing congestion, which will only increase in the coming years if we do not 

make appropriate bands, like the 5 GHz band, more attractive for investment and 

innovation.’’ 23 A paper recently published by CableLabs detailed the spectrum 

shortage issues: ‘‘[A]ny reasonable extrapolation of known trends leads to the conclusion that WiFi spectrum exhaust is a matter of ‘when,’ not ‘if ’. . . . In the absence of new WiFi spectrum, it is likely that wireless broadband consumers will experience reduced performance. This poses a risk to continued growth of the wireless 

30 

24See Rob Alderfer, CableLabs, WiFi Spectrum: Exhaust Looms 5 (May 28, 2013) (included 

as Attachment A to Comments of Nat’l Cable & Telecomms. Ass’n, ET Docket No. 13–49 (May 

28, 2013)) (‘‘WiFi Spectrum: Exhaust Looms’’). 25See, e.g., John Cox, Wi-Fi Devices Crowd 2.4 GHz Band; IT Looks to 5 GHz Band, Network 

World (Oct. 24, 2011), http://www.networkworld.com/news/2011/102411-wifi-unbalanced252237.html (‘‘ ‘The 2.4 GHz band is congested, a symptom of the number of devices that only 

operate on that band, and the limitation of its [only] three non-overlapping channels.’ ’’). 26See Middle Class Tax Relief and Job Creation Act of 2012, Pub. L. No 112–96, § 6406, 126 

Stat. 156, 231 (2012) (codified at 47 U.S.C. § 1453). U–NII devices are designed to provide shortrange, high-speed wireless networking capability. 27See Revision of Part 15 of the Commission’s Rules to Permit Unlicensed National Information Infrastructure (U–NII) Devices in the 5 GHz Band, Notice of Proposed Rulemaking, 28 FCC 

Rcd. 1769 (2013) (‘‘FCC 5 GHz Notice’’). 28See Comments of Comcast Corp., ET Docket No. 13–49 at 14–17 (May 28, 2013) (‘‘Comcast 

5 GHz Comments’’). 29See Cisco, 801.11ac: The Fifth Generation of Wi-Fi Technical White Paper, 3 (Aug. 2012), 

available at http://www.cisco.com/en/US/prod/collateral/wireless/ps5678/ps11983/whitel 

paperlc11-713103.pdf. 30See id. at 4. 31See WiFi Spectrum: Exhaust Looms at 21 (noting that ‘‘the full benefit of 802.11ac cannot 

be realized under the current terms of access to 5 GHz [spectrum]’’). 

broadband ecosystem, a central element of technology and economic policy in the 

United States.’’ 24 Essentially, there are so many devices using unlicensed spectrum 

in the 2.4 GHz band in certain locations that the result is significantly reduced WiFi performance.25 Further growth in data consumption via unlicensed technologies 

simply cannot occur unless service providers have access to more unlicensed spectrum. 

B. The FCC Must Remove Regulatory Impediments to Address the Unlicensed 

Spectrum Crunch 

Perhaps the most important unlicensed spectrum-related proceeding currently underway at the FCC focuses on the 5 GHz band. The Spectrum Act directed the FCC 

to launch a proceeding to modify Part 15 of the FCC’s rules to allow Unlicensed National Information Infrastructure (‘‘U–NII’’) devices to operate in the 5.350–5.450 

GHz band, and directed the National Telecommunications and Information Administration (‘‘NTIA’’) to begin the process of allowing more intense sharing of the 5.350– 

5.450 GHz and 5.850–5.925 GHz bands between incumbent users and unlicensed 

services like Wi-Fi.26 On February 20, 2013, the FCC issued a Notice of Proposed 

Rulemaking that would allow unlicensed devices to share these bands with existing 

users, and, critically, would update and improve the rules that govern the existing 

5 GHz unlicensed bands.27 Comcast commends Congress, NTIA, and the FCC for 

taking the necessary and significant first steps toward ensuring the availability of 

sufficient spectrum to encourage the continued growth, development, and proliferation of unlicensed wireless services. 

As Comcast explained in our comments to the FCC, the 5 GHz band represents 

a crucial resource as the FCC works to alleviate the dramatic shortage in spectrum 

available for unlicensed services.28 The 5 GHz band is the only band available for 

unlicensed services that can accommodate sufficiently wide channels to allow providers like Comcast to take advantage of the next generation of Wi-Fi—a new standard called 802.11ac. This standard will allow dramatically faster broadband speeds, 

potentially up to or in excess of one gigabit per second.29 In contrast to networks 

using prior standards, Wi-Fi networks operating on the 802.11ac standard will support multiple data-intensive uses, such as several users simultaneously streaming 

HD videos, without any appreciable degradation in quality.30 To realize its full potential, however, this standard requires 160 megahertz-wide channels, far wider 

than channels currently available in any of the spectrum bands used for unlicensed 

use. 

The rules that currently govern the 5 GHz band significantly undermine investment today and prevent us from realizing the wide-band channels we will need to 

support 802.11ac.31 Specifically, power levels are prohibitively low in some parts of 

the band. Rules unnecessarily prevent any outdoor use of a large part of the band 

where there are no government incumbents. And government operations in another 

part of the band result in rules that require the use of cumbersome ‘‘listen-beforetalk’’ technologies (also called Dynamic Frequency Selection, or ‘‘DFS’’). As a result, 

there is only a fraction of the current 5 GHz band that providers can use for WiFi networks. 

Fortunately, the FCC has proposed changes to its 5 GHz rules that would make 

the band far more attractive to investment and build-out of unlicensed services 

31 

32See FCC 5 GHz Notice ¶ 26–28. 33See Comcast 5 GHz Comments at 21–22 (May 28, 2013) (setting forth the five principles 

that the FCC should adopt as it moves forward with the 5 GHz proceeding). 34See, e.g., Comments of Nat’l Cable & Telecomms. Ass’n, ET Docket No. 13–49, at 12–23 

(May 28, 2013); Comments of Wireless Internet Serv. Providers Ass’n, ET Docket No. 13–49, 

at 6–12 (May 28, 2013); Comments of Consumer Elecs. Ass’n, ET Docket No. 13–49, at 12–14 

(May 28, 2013); Comments of Cisco Systems, Inc., ET Docket No.13–49, at 41–56 (May 28, 

2013). 35See Executive Office of the President, President’s Council of Advisors on Science and Technology, Report to the President: Realizing the Full Potential of Government-Held Spectrum to 

Spur Economic Growth at vi (July 2012) (‘‘The essential element of this new Federal spectrum 

architecture is that the norm for spectrum use should be sharing, not exclusivity.’’). 36See generally DSRC: The Future of Safer Driving Fact Sheet, Research & Innovative Tech. 

Admin., Dep’t of Transp., http://www.its.dot.gov/factsheets/dsrclfactsheet.htm (last visited 

May 31, 2013) (describing DSRC technology and ongoing experimental research projects that 

‘‘may have the potential to significantly reduce’’ the frequency of dangerous accidents in the future). 37See The Road Ahead: Advanced Vehicle Technology and its Implications: Hearing Before the 

S. Comm. on Commerce, Sci., and Transp., 113th Cong. 6 (2013) (statement of Mitch Bainwol, 

President & CEO, Alliance of Automobile Manufacturers) (arguing that policymakers should 

‘‘ensur[e] that the radio frequency spectrum now dedicated to V-to-V and V-to-I—the 5.9 GHz 

band—remains solely dedicated to auto communications technologies.’’). Although Comcast appreciates the important safety benefits that such applications may someday bring, we believe 

that spectrum exclusivity in this band is both unreasonable and unnecessary. 

without causing harmful interference to incumbent users.32 In the comments we 

filed with the FCC last week, Comcast supported the FCC’s proposals to: (1) harmonize the 5 GHz U–NII–1 and U–NII–2 bands by removing an indoor-only restriction and increasing allowable power levels in the U–NII–1 band; (2) harmonize the 

U–NII–3 and the new U–NII–4 bands by setting the technical rules in U–NII–4 to 

match those of U–NII–3; and (3) update technical protections for government operations in the U–NII–2 bands but not extend DFS to either the U–NII–1 or U–NII– 

4 bands.33 Devices operating in the 5 GHz bands would continue to be subject to 

the FCC’s rules prohibiting U–NII devices from creating harmful interference to existing users. 

These proposals have received widespread support from a broad range of interests, including both industry and public interest groups, because they enable more 

effective spectrum sharing in the 5 GHz band.34 As the Administration has recognized, spectrum sharing, where technically feasible, maximizes the efficient use of 

spectrum and permits the simultaneous delivery of multiple services that provide 

significant public benefits.35 The 5 GHz band is an ideal band to implement this 

approach: the changes the FCC has proposed will facilitate significant innovation 

and investment in unlicensed technologies, even while existing users may continue 

to use this spectrum to develop more experimental technologies that may come to 

fruition at some point in the future, such as the Dedicated Short-Range Communications (‘‘DSRC’’) service, which enables vehicle-to-vehicle and vehicle-to-infrastructure 

communications-based automotive safety applications.36 Notwithstanding the recent 

testimony by certain representatives of the auto industry before this Committee 

supporting the continued exclusive use of this valuable spectrum,37 Comcast agrees 

with those in the technology and auto sectors who believe that sharing of this spectrum is possible, and that doing so would be solidly in the public interest. We urge 

all relevant stakeholders to pursue in good faith a spectrum sharing outcome for the 

5 GHz band that will serve the public interest by protecting incumbents and 

unleashing a new wave of innovation and investment. 

We look forward to working with Congress, the FCC, NTIA, and other stakeholders to make this vision a reality as quickly as possible. 

III. Conclusion 

The future of wireless is bright, and Comcast is very excited to be a part of that 

future. Consumer demand for wireless services—licensed and unlicensed—continues 

to grow at unprecedented rates, creating new opportunities to provide innovative 

technological solutions and drive economic growth. Unlicensed wireless services in 

particular have proven to be an invaluable part of the wireless ecosystem, dramatically enhancing the value of licensed wireless and fixed broadband services. 

All indications are that the trends toward heavier reliance on unlicensed services 

will continue well into the future. Congress and the FCC have made important 

strides by addressing the substantial policy challenges raised by this rapid technological development. Continued growth in this area will require more spectrum to 

address the critical shortages that are already occurring in many locations around 

the country. It will also require a reevaluation of the regulations that govern unliVerDate Nov 24 2008 06:36 Apr 03, 2014 Jkt 075679 PO 00000 Frm 00035 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\87341.TXT JACKIE
32 

censed operations, especially in the 5 GHz band. The FCC’s current 5 GHz-related 

proceeding is a welcome development, but there is more work to be done. 

Comcast is firmly committed to engaging with Congress, the Administration, and 

the FCC as they continue to evaluate our Nation’s spectrum policy and to implement solutions that will produce even greater economic and technological growth 

and benefits for consumers. 

Thank you for the opportunity to testify today. 

Senator PRYOR. Thank you. 

Mr. Ford. 

STATEMENT OF GEORGE S. FORD, PH.D., CHIEF ECONOMIST, 

PHOENIX CENTER FOR ADVANCED LEGAL AND ECONOMIC 

PUBLIC POLICY STUDIES 

Mr. FORD. Thank you, Mr. Chairman, for the invitation. 

The wireless industry has an institutionalized complaint box at 

the FCC, so there’s always a lively debate about various issues 

going on. I think, by far, the most important today is the lack of 

spectrum, the lack of sufficient spectrum to satisfy the demand for 

data over mobile wireless networks and Wi-Fi networks is—as well. 

I’ve written a lot about the spectrum issue, and I’ll summarize my 

testimony, which covers those issues in more detail. 

There are three major questions related to spectrum. One is, how 

much does the industry need? And I think it’s suffice to say ‘‘a lot.’’ 

At 500 megahertz, which is what the FCC recommended, that’s 

twice what the mobile wireless industry has today, so that’s a very 

significant increase in spectrum. It would be interesting to see if 

we can get near that number in the next couple of decades. 

The next question is given the lack of fallow spectrum, where 

you’re going to get it. And I think the answer there is, after some 

initial low hanging fruit, you will pry it from its present owners’ 

hands; in some cases, from their cold, dead hands, I suspect. 

There are three ways in which we can get some spectrum. We 

have secondary markets, in which the industry engages in transactions. That doesn’t necessarily increase the amount of spectrum 

for wireless service, but just shifts it around into a more efficient 

configuration. 

There are two things the FCC could do to improve the secondary 

market—at least two—which doesn’t function all that well today. 

One is to increase the flexibility of use of spectrum. I think the 

NTIA would need to be involved with that, as well, and that way 

we could move spectrum around without constraints or limits on 

how it can be used, within the bounds of reason and technology. 

And, second, for the FCC to quickly approve transfers that do not 

have demonstrably anticompetitive effects. In some cases, these 

transfers are used to fund pet projects, right or wrong, in the form 

of voluntary conditions. 

The other source of spectrum is government. There has been a 

huge discussion of that lately. Most of the reports I’ve seen on it 

are not promising in that regard. I think that Congress will eventually have to be involved in that process. One recent report by some 

advisors to the President said, ‘‘We will not’’—or did not recommend ever again giving government spectrum to the private sector through auctions. That’s a pretty bold statement, I think. 

The other is the incentive auction, which is underway. It will be 

interesting to see how that works out. It’s a very complicated procVerDate Nov 24 2008 06:36 Apr 03, 2014 Jkt 075679 PO 00000 Frm 00036 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\87341.TXT JACKIE
33 

ess, with many, many constraints and objectives. But, we do have 

some very smart people working on it, so there is hope. 

The major question, I think, is who gets it. There’s going to be 

too little, I think, spectrum to satisfy everyone, so there’s going to 

be a fight over who has it, who keeps it, and who gets it. We’re 

going to have debates over licensed and unlicensed spectrum. I 

think that debate can be solved relatively easily. Unlicensed spectrum, or low-powered devices, can use spectrum more flexibly than 

can the broadband networks—mobile broadband networks that 

need higher quality spectrum under an exclusive license. 

The other question is how spectrum gets distributed among 

firms. We have the calls today for spectrum caps, participation limits by AT&T and Verizon. In the upcoming auctions, of course, people will use the government process to advantage themselves when 

they can, although I do think people also believe that there are 

valid reasons to do this. 

In this regard, I think what I would say is, we need to make a 

decision, I think, in this country, as to whether or not we’re going 

to use auctions, to allocate spectrum, in which the highest bidder 

wins the spectrum, and that’s how we do things, which is how we 

do things in most markets, or we adopt a comparative hearing approach, where the Government chooses who gets it, in an effort to 

control what the industry looks like, to control market structure, 

control market shares, that sort of thing. And it’s just a question 

of honesty, because, as an analyst, you kind of want to know what 

the objective is before you start designing rules and analyzing various policies. If we pretend to hold auctions among preselected winners, it’s—it makes it difficult to really understand what it is that 

we’re doing. Making that decision is above my pay grade, but I’m 

just suggesting that we have some honesty brought to the process 

in that regard. The—and in that capacity, economic theory is very 

important. When you introduce spectrum exhaust, which is what 

everybody’s talking about right now in wireless, it radically 

changes the way competition works. And one of the papers—it’s 

summarized in my testimony—is a paper entitled ‘‘Wireless Competition and Spectrum Exhaust.’’ And what you find when an industry faces the exhaust of spectrum, that competition, in the way 

we normally think of it, which is a headcount of firms, is no longer 

a valid way to think about the industry, because if there’s a constraint on capacity, you can’t increase output, the role of competition is to increase output, so competition is essentially made impotent in that regard. And if you include the assumption of an economy of scale in the use of spectrum, so that capacity rises faster 

than the amount of spectrum that you get, which is an assumption 

that’s widely accepted, you could actually have a case where having 

few firms in the industry has lower prices and better-quality services than more firms in the industry. 

That’s a very important addition to the analysis, so we can’t simply think of it in the way we normally think of competition, which 

is inaccurate in itself, but, in this case, it’s profoundly inaccurate. 

The spectrum caps, in the past, have largely been intended to increase the number of firms, to expand the base of competitors, to 

add new people to the game. I don’t think that’s going to happen. 

We’ve had people outside the industry win spectrum. They end up 

34 

going back to the industry to try to use that spectrum—the DISH/ 

Sprint deal, SpectrumCo selling it to Verizon, and other cases. 

Additional entry is probably unlikely in—under current conditions, so we can’t be thinking of having a fifth nationwide provider, 

for example. We need to be more worried, probably, about going 

from four to three, at this point, given the financial condition of 

some of the wireless carriers. 

So, that purpose of a spectrum cap is no longer valid, and the 

spectrum cap, theoretically, has, to my knowledge, never been contemplated as a way to shift market share among various players. 

I’m probably going over—no, the clock’s still running. 

The other question on spectrum caps or bidding restrictions relates to revenue. This is a—this auction is intended to raise a lot 

of revenues for specific purposes. I think the argument that ‘‘eliminating those with very high demands for spectrum will increase 

revenue’’ is not really plausible. The theory really doesn’t support 

it. And, in fact, the theory that’s cited to support that would say 

you should exclude all incumbents from the auction, not just the 

major incumbents. And history has shown that non-incumbents 

have pretty high demand for spectrum, and some have made significant profits buying it and reselling it. 

There are some other issues—I know I’m probably—I don’t think 

that started on time, and people are looking at me funny—there 

are some other issues—you know, unlocking interoperability, those 

sorts of things—that are covered in my report, if you care to read 

it, or if you have any questions about those issues. 

Thank you. 

[The prepared statement of Mr. Ford follows:] 

PREPARED STATEMENT OF GEORGE S. FORD, PH.D., CHIEF ECONOMIST, PHOENIX

CENTER FOR ADVANCED LEGAL AND ECONOMIC PUBLIC POLICY STUDIES

Table of Contents 

I. Introduction and Summary of Testimony 35 

II. Overview of the State of Wireless Communications 35 

III. The Problem that Won’t Go Away: Spectrum Exhaust 36 

IV. How Much Additional Spectrum Should be Allocated to Commercial Use? 37 

V. Where Does New Spectrum Come From? 38 

A. Secondary Market Transactions 38 

B. Repurposing Government Spectrum 39 

C. Voluntary Incentive Auctions 39 

VI. Who Gets It? The Allocation of Additional Spectrum in the Mobile Wireless Industry 40 

A. Understanding Equilibrium Industry Structure 41 

B. Wireless Competition Under Spectrum Exhaust 42 

C. Allocating Finite Spectrum Resources 43 

D. More Spectrum DOES NOT Mean More Competitors 44 

E. The Department of Justice’s Ex Parte Filing 46 

F. Incumbent Exclusion Rules May Have a Potential Adverse Impact on Auction Revenue 47 

VII. Other Factors Impacting the Wireless Ecosystem 48 

VIII. Conclusion 49 

35 

1 CTIA Semi-Annual Wireless Industry Survey, CTIA: The Wireless Association (2012) (available at: http://www.ctia.org/advocacy/research/index.cfm/AID/10316) (hereinafter ‘‘CTIA Survey’’). 2 Id. Population data provided by the U.S. Census Bureau (available at: http://www 

.census.gov/popest/national/asrh/NC–EST2009-sa.html). 3Forecasts based on extrapolating a fitted Gompertz curve to the CTIA Survey data, supra 

n. 1. 4 Industry productivity, measured crudely as connections per employee, is rising about 10 percent per year. CTIA Survey, id. 5L. Hettick, Report: Wireless Substitution, VoIP Overtake ILEC Landline Dominance, NETWORK WORLD (April 19, 2013) (available at: http://www.networkworld.com/newsletters/ 

converg/2013/042213convergence1.html). 

I. Introduction and Summary of Testimony 

Chairman Pryor, Ranking Member Wicker, and members of the Subcommittee, 

good afternoon and thank you for inviting me to testify before the Committee today. 

My name is Dr. George S. Ford, and I am the Chief Economist of the Phoenix 

Center for Advanced Legal and Economic Public Policy Studies. I hold a Ph.D. in 

Economics from Auburn University, and the economics of the communications industry has been the focus of my career. Prior to joining the Phoenix Center fulltime, I worked at the Federal Communications Commission as well as for several 

companies in the telecommunications industry, and I also serve as an Adjunct Professor at Samford University. I have written numerous research studies that explore 

the various complex issues facing the industry, and many of these studies were subsequently published in peer-reviewed academic journals, books and other academic 

outlets. Given the rapid growth of the wireless sector, a significant portion of my 

research has focused on understanding the underlying economics of the wireless 

communications industry, with a particular focus on public policy in this critical sector of the U.S. economy. 

By means of introduction, the Phoenix Center is a non-profit 501(c)(3) organization that studies broad public policy issues related to governance, social and economic conditions, with a particular emphasis on publishing academic-quality research about the law and economics of regulated industries. Among other activities, 

the Phoenix Center publishes a PUBLIC POLICY PAPER SERIES, a POLICY BULLETIN

SERIES, a POLICY PERSPECTIVES SERIES, and our blog @LAWANDECONOMICS, where 

we provide real-time comment on current events, as well as to highlight market examples of the relevancy of our research. Since the Phoenix Center’s founding, we 

have published over 100 scholarly papers, with over a third of these papers published in scholarly academic journals (all of which may be downloaded free from our 

webpage or the Social Science Research Network). We also sponsor Congressional 

briefings, Policy Roundtables, educational retreats, as well as our Annual U.S. 

Telecoms Symposium. The Phoenix Center makes it a policy not to endorse or support any particular piece of Federal or state legislation or proposed rule. Our primary mission is not to tell you what to think about an issue but how to think about 

it. As such, our contributions to communications policy are decidedly more analytical than most, and we refuse to ignore the institutional realities and economic constraints of the communications business and related sectors. 

II. Overview of the State of Wireless Communications 

Across the globe the mobile communications revolution is well underway. From 

advanced economies such as the U.S., to developing economies like India, mobile 

telecommunications, in both voice and data forms, is quickly becoming the communications technology of choice. In the U.S., it took less than fifteen years for wireless 

telephones to move from a thinly consumed service to effective ubiquity.1 At the end 

of 2012, there were 326.5 million mobile wireless connections in the United States, 

which translates to roughly 1.24 accounts for every citizen ten years of age or older.2

My own forecast suggests there will be about 50 million connections added to this 

count in the next five years.3 While the demand for mobile service continues to skyrocket, average revenue per connection remains stable, a testament to the significant increases in industry productivity and pricing innovation.4

This rapid growth has its victims. Increasingly, the mobile phone is displacing 

more traditional land-line voice services. In each quarterly financial statement, publicly traded local telephone companies report persistent fixed-line losses. In 2012, 39 

percent of households were wireless only, and that number is expected to grow by 

10 percent this year.5 Mobile wireless has all but killed the payphone industry, and 

the mobile platform over time will take down and build up many other industries 

and industry segments. In fact, in the not so distant future, it is expected that mobile appliances—like the tablet computer—will replace traditional computers and 

even television for many consumers, thereby impacting the laptop and television 

36 

6See, e.g., G.S. Ford and L.J. Spiwak, Justifying the Ends: Section 706 and the Regulation 

of Broadband, PHOENIX CENTER POLICY PERSPECTIVE No. 12–04 (August 13, 2011) (available at: 

http://www.phoenix-center.org/perspectives/Perspective12-04Final.pdf). 7 In the Matter of Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act 

of 1993 Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile 

Wireless, Including Commercial Mobile Services, FCC 13–34, SIXTEENTH REPORT (rel. March 21, 

2013) at Table 4 (hereinafter ‘‘Sixteenth CMRS Report’’). 8See, e.g., S. Crawford, CAPTIVE AUDIENCE: THE TELECOM INDUSTRY AND MONOPOLY POWER

IN THE NEW GILDED AGE (Yale University Press 2013), Chapter 8; G.S. Ford, Fabricating a 

Broadband Crisis? More Evidence on the Misleading Inferences from OECD Rankings, PHOENIX

CENTER PERSPECTIVE No. 10–05 (July 7, 2010) (available at: http://www.phoenix-center.org/perspectives/Perspective10-05Final.pdf). 9Significant FCC Actions and Key Developments in the Broadband Economy, Federal Communications Commission (March 22, 2013) (available at: http://hraunfoss.fcc.gov/edocslpublic/ 

attachmatch/DOC–319728A1.pdf). 10 A description of the capacity limitation of mobile broadband network is provided in CON- NECTING AMERICA: THE NATIONAL BROADBAND PLAN, Federal Communications Commission 

(March 16, 2010) at Ch. 5 (available at: http://hraunfoss.fcc.gov/edocslpublic/attachmatch/ 

DOC–296935A1.pdf) (hereinafter the National Broadband Plan) and The Broadband Availability 

Gap, OBI TECHNICAL PAPER NO. 1, Federal Communications Commission (April 2010) at Ch. 

4 (available at: http://www.broadband.gov/plan/broadband-working-reports-technical-papers 

.html) (hereinafter ‘‘Broadband Availability Gap’’). 11T. R. Beard, G. S. Ford, L. J. Spiwak & M. Stern, A Policy Framework for Spectrum Allocation in Mobile Communications, 63 FED. COMM. L.J. 639, 642 (2011) (http://www.phoenix-center.org/papers/FCLJSpectrum.pdf). 

markets. For many individuals and households, mobile broadband may be the Internet connection of choice, particularly as new technologies are deployed offering 

speeds commensurate with that of wireline connections—but with the added bonus 

of mobility and near universal availability. While mobile wireless services will likely 

never cover every nook and cranny of the U.S.—there’s neither a private nor public 

business case for it 6—recent statistics show that 99.9 percent of the Nation’s population and 95.3 percent of the Nation’s road miles are covered by at least one mobile 

wireless carrier, and 99.3 percent of the population has access to two or more carriers.7 Coverage continues to grow as new technologies and spectrum are brought 

to market. Last year, the industry invested a record $30 billion in their networks, 

which is $92 of capital expenditures per connection (the equivalent of two month’s 

revenue). 

In recent years, it’s been trendy to be down on the state of the U.S. communications industry, a grumbling motivated largely by the desire to expand regulation in 

the sector so as to favor one industry segment over another.8 Yet, even among the 

‘‘woe is me’’ crowd, a negative sentiment is hard to embrace for the mobile wireless 

industry. Indeed, now-former FCC Chairman Julius Genachowski recently observed, 

‘‘the U.S. is now the envy of the world in advanced wireless networks, devices, applications, among other areas,’’ a claim based on the following anecdotes: (a) the U.S. 

is the first country deploying 4G LTE networks at scale, and in late 2012 the U.S. 

had as many LTE subscribers as the rest of the world combined, making the United 

States the global test bed for LTE apps and services; (b) annual investment in U.S. 

wireless networks grew more than 40 percent between 2009 and 2012, from $21 billion to $30 billion while investment in European wireless networks has been flat 

since 2009 and wireless investment in Asia, including China, is up only 4 percent 

during that time; (c) more than 90 percent of smartphones sold globally in 2012 run 

operating systems developed by U.S. companies, up from 25 percent three years ago; 

(d) the new mobile apps economy is a ‘‘made in the U.S.A.’’ phenomenon that has 

created more than 500,000 U.S. jobs; and, finally (e) investments in wireless 

broadband infrastructure created more than 1.6 million U.S. jobs since 2007.9 The 

industry is performing well by almost all meaningful standards. 

III. The Problem that Won’t Go Away: Spectrum Exhaust 

The explosive growth of the U.S. wireless sector is a mixed blessing. On the one 

hand, it provides an enormous economic boon to consumers, business, and providers, 

but on the other hand it is beginning to test the capacity of service providers offering such services. Data hungry services and devices strain the existing capacity of 

wireless networks, where the capacity is directly related to the amount of spectrum 

available to the firms.10 Spectrum is an essential input for providers of mobile wireless voice and data service. Indeed, without spectrum, there can be no service at 

all. The more spectrum that a provider has, the better are the services it can provide and the cheaper it can do so.11 Unfortunately, as Americans liberally consume 

data with their smartphones and tablets, the U.S. is rapidly exhausting the capacity 

available from the existing supply of commercial spectrum. Increasingly, rationing 

37 

12 National Broadband Plan, supra n. 10 at 1, 10. 13 Id. at 26. 14See Remarks by Lawrence H. Summers, Technical Opportunities, Job Creation and Economic Growth (June 28, 2010) (available at: http://www.whitehouse.gov/administration/ 

eop/nec/speeches/technological-opportunities-job-creation-economic-growth). 15Prepared Remarks of Chairman Julius Genachowski, Federal Communications Commission, 

2011 International Consumer Electronics Show, Las Vegas, NV (January 7, 2011) (available at 

http://hraunfoss.fcc.gov/edocslpublic/attachmatch/DOC-303984A1.pdf). 16President Obama Details Plan to Win the Future through Expanded Wireless Access, OFFICE

OF THE PRESS SECRETARY, THE WHITE HOUSE (February 10, 2011) (available at: http:// 

www.whitehouse.gov/the-press-office/2011 

/02/10/president-obama-details-plan-win-future-through-expanded-wireless-access). 17 R.N. Clarke, Expanding Mobile Wireless Capacity: The Challenges Presented by Technology 

and Economics (January 4, 2013) (available at: http://ssrn.com/abstract=2197416 or http:// 

dx.doi.org/10.2139/ssrn.2197416). 18Of course, without additional spectrum, higher prices can be used to ration the limited capacity, but many view this outcome as least desirable. 19FCC Staff Technical Paper, Mobile Broadband: The Benefits of Additional Spectrum (Oct. 

2010) at 15 (hereinafter ‘‘FCC Technical Paper’’) (available at http://download.broadband.gov/ 

plan/fcc-staff-technicalpaper-mobile-broadband-benefits-of-additional-spectrum.pdf) (‘‘547 MHz, 

in total, is currently licensed under flexible use rules, which allows for mobile broadband and 

voice services.’’) 20 R.J. Shapiro, The Economic Implications of Restricting Spectrum Purchases, CENTER FOR

BUSINESS & PUBLIC POLICY, GEORGETOWN UNIVERSITY (April 2013) at Table 3 (available at: 

http://www.gcbpp.org/files/AcademiclPapers/EconImplicationsSpectrumAuctions.pdf). 

capacity through price and non-price methods is necessary to maintain an acceptable quality of service. 

A looming ‘‘spectrum crunch’’ is now well established. The National Broadband 

Plan concluded that the present inventory of commercial spectrum represents ‘‘just 

a fraction of the amount that will be necessary to match growing demand,’’ 12 and 

proposed to make 500 Megahertz (‘‘MHz’’) of additional spectrum available by 2020 

for the provision of mobile broadband services, with ideally 300 MHz of that spectrum being made available by 2015 specifically for mobile broadband services,13 a vision which President Obama formally endorsed by Presidential Memorandum.14

Without action, former Federal Communications Commission (‘‘FCC’’) Chairman Julius Genachowski cautioned, ‘‘network congestion will grow, and consumer frustration will grow with it.’’ 15 The White House is also concerned, concluding that there 

is a ‘‘spectrum crunch that will hinder future innovation.’’ 16 A recent technical 

study comparing the capabilities of 4G LTE wireless technology to meet the rapidly 

growing demand for mobile data concluded that ‘‘without significantly increased allocations of spectrum, wireless capacity expansion will be wholly inadequate to accommodate expected demand growth.’’ 17 Allocating more spectrum to advanced mobile services is widely viewed as a sensible, if not a necessary, public policy.18

However, merely stating that more spectrum is to be allocated to commercial mobile services leaves some highly relevant details unresolved. There are (at least) 

three high-level questions that must be answered when increasing spectrum availability. They are: 

1. How much additional spectrum is to be allocated to the commercial sector? 

2. Where does this spectrum come from? 

3. Who gets it? 

As I see it, the latter two questions will be the most significant policy issues facing wireless communications in the next decade. In the following sections of my testimony, I will address each of these important questions. Of course, I will continue 

to study these issues in the future, and I would be happy to share my findings with 

you in this or some other forum. 

IV. How Much Additional Spectrum Should be Allocated to Commercial 

Use? 

How much additional spectrum does the commercial sector need? The simple answer is ‘‘a lot.’’ The mobile wireless industry today runs on about 500 MHz of spectrum.19 As already stated, the FCC’s National Broadband Plan recommended the 

allocation of an additional 500 MHz for commercial wireless broadband services, 

with 300 MHz of that going specifically to mobile wireless services. The mobile wireless industry asked for 800 MHz, and a recent study sets the figure at nearly 1,064 

MHz.20 These are very large numbers, and as discussed next, the ‘‘where will it 

come from’’ question is likely to be a binding constraint on how much, in the end, 

gets reallocated to commercial use. ‘‘As much as is possible’’ is likely the best answer to the first question, and this amount is likely to be too little. Thus, the soluVerDate Nov 24 2008 06:36 Apr 03, 2014 Jkt 075679 PO 00000 Frm 00041 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\87341.TXT JACKIE
38 

21Of course, the definition of ‘‘commercial use’’ lies in the beholder, and difficult policy choices 

must also be made on how to balance new spectrum allocations between licensed and unlicensed 

use by low power devices. Both licensed and unlicensed spectrum create value; as such, providing spectrum for both uses is a good policy. The FCC is already looking at expanding unlicensed use in the 5 GHz band, and low power devices may be permissible in the duplex gap 

of the broadcast spectrum band plan. Low power devices are also well suited for spectrum sharing, which is a spectrum management approach we may see more of in the future. However, 

it is the services provided over exclusively licensed spectrum—that is, the mobile broadband 

services supported by billions in infrastructure investment—where spectrum exhaust is most 

problematic. 22See T. Koutsky and L. Spiwak, Separating Politics from Policy in FCC Merger Reviews: A 

Basic Legal Primer of The ‘‘Public Interest’’ Standard, 18 COMMLAW CONSPECTUS 329 (2010) 

(available at: http://www.phoenix-center.org/papers/CommLawConspectusMergerStandard.pdf). 23T.R. Beard, G. Ford, L. Spiwak, and M. Stern, Taxation by Condition: Spectrum 

Repurposing at the FCC and the Prolonging of Spectrum Exhaust, PHOENIX CENTER POLICY

PAPER NO. 44 (September 2012) (available at: http://www.phoenix-center.org/pcpp 

/PCPP44Final.pdf). 

tion to spectrum exhaust will require both additional spectrum, significant technological advancement in the use of spectrum, and informed public policy.21

V. Where Does New Spectrum Come From? 

As for where the spectrum will come from the answer is obvious—it will be pried 

from the hands of those that already have it. The National Broadband Plan identified very little spectrum that is presently ‘‘fallow’’ and could be auctioned without 

much resistance, so satisfying the commercial mobile wireless industry’s need for 

additional spectrum will necessarily require a repurposing and reallocation of already licensed spectrum. There are three potential sources for additional commercial 

spectrum. 

A. Secondary Market Transactions 

One obvious source for additional spectrum lies in the secondary market for spectrum. At present, this market is not well functioning, but a number of recent transactions show that there are signs of life. 

Secondary market transactions can be beneficial in two ways. First, it can shift 

the spectrum already assigned to commercial wireless services into more efficient 

configurations. That is, the total amount of spectrum does not increase, but is merely reallocated among carriers in a manner that permits an expansion of capacity. 

Second, secondary market transactions can move spectrum assigned to some other 

purpose into the commercial wireless space. For example, the FCC recently permitted mobile satellite spectrum to be used for terrestrial mobile broadband service. 

The broadcast television incentive auctions also fall into this category. 

There are a few reasons why the secondary market has been slow to develop. One 

factor is the limited flexibility some licensee’s face in how their spectrum can be 

used. Greater flexibility in licenses will help the market develop, and the FCC and 

NTIA should be actively pursuing ways to increase flexibility. 

Another hindrance to the development of a secondary market is that the regulatory approval process for is, in most cases, far from streamlined, as the government, the applicants’ competitors, and political interests groups regularly use the 

regulatory process to garner concessions that they would not otherwise be able to 

obtain in the normal course of business.22 The use of ‘‘voluntary conditions’’ by the 

FCC in mergers and other transactions greatly diminishes the effectiveness of the 

secondary market to address spectrum exhaust. 

On this point, I would like to call your attention to a recent POLICY PAPER of the 

Phoenix Center’s entitled Taxation by Condition: Spectrum Repurposing at the FCC 

and the Prolonging of Spectrum Exhaust.23 In this paper, my co-authors and I modeled the implications of the FCC’s regulatory process wherein the agency applies 

value-extracting mandatory and voluntary conditions on parties to a spectrum exchange. These conditions operate much like a tax on secondary market transactions, 

and in that light the implications of the regulatory process are apparent. When you 

tax something: (1) you get less of it; and (2) you will affect what types of transactions you get. On the first point, basic economic logic tells us that taxes reduce 

the incentive to make transactions. ‘‘Taxing’’ efforts to move spectrum to higher-valued uses is a particular bad policy when facing a spectrum shortage. On the second 

point, the conditioning of spectrum repurposings can affect the evolution of and efficient functioning of a secondary market for commercial spectrum. That is, we may 

still observe many deals, but these deals will be those that attract less attention 

and thus fewer conditions. As such, ‘‘taxation by condition’’ may discourage the larger scale transactions necessary to resolve spectrum exhaust. 

39 

24 Report to the President: Realizing the Full Potential of Government-Held Spectrum to Spur 

Economic Growth, EXECUTIVE OFFICE OF THE PRESIDENT—PRESIDENT’S COUNCIL OF ADVISORS

ON SCIENCE AND TECHNOLOGY (July 2012) (hereinafter ‘‘PCAST Report’’) at p. 8 (available at: 

http://www.whitehouse.gov/sites/default/files/microsites/ostp/ 

pcastlspectrumlreportlfinall 

julyl20l2012.pdf); see also A. Pai, Too Much Government, Too Little Spectrum, Member Diary, 

REDSTATE (January 3, 2013) (available at: http://www.redstate.com/ajitpai/2013/01/03/toomuch-government-too-little-spectrum); J. Gruenwald, Wireless Industry Already Looking Ahead 

for More Spectrum, NATIONAL JOURNAL, TECHNOLOGY (February 29, 2012) (available at: http:// 

www.nationaljournal.com/tech/wireless-industry-already-looking-ahead-for-more-spectrum20120229) (quoting Charla Rath, Vice President Wireless Policy, Verizon: ’’ We need to be thinking about how we get a continuous supply of spectrum out there for commercial mobile wireless. 

. . . And, frankly, one of the key places to look is government spectrum . . .’’). 25PCAST Report, id. at p. 49. 26 Id. 27Plan and Timetable to Make Available 500 Megahertz of Spectrum for Wireless Broadband, 

U.S. Department of Commerce—National Telecommunications and Information Administration 

(October 10, 2010) (available at: http://www.ntia.doc.gov/files/ntia/publications/tenyearplan 

l11152010.pdf); An Assessment of the Near-Term Viability of Accommodating Wireless 

Broadband Systems in the 1675–1710 MHz, 1755–1780 MHz, 3500–3650 MHz, and 4200–4220 

MHz, 4380–4400 MHz Bands, U.S. Department of Commerce—National Telecommunications 

and Information Administration (October 10, 2010) (available at: http://www.ntia.doc.gov/files/ 

ntia/ 

publications/fasttrackevaluationl11152010.pdf). 28PCAST Report, supra n. 24. 

The policy implication of our analysis is clear: If the FCC wants to encourage a 

secondary market, then ‘‘taxing’’ efforts to repurpose spectrum in the form of license 

conditions is perhaps the worst of all policies. Instead, barring legitimate competitive 

or interference concerns, efforts to repurpose spectrum from low-to high-value uses 

should be expeditiously approved without extraneous conditions. 

B. Repurposing Government Spectrum 

One of the largest untapped sources of potential new spectrum lies with various 

Federal agencies which hold exclusive or primarily licenses for about half (1,687 

MHz) of the ‘‘beachfront’’ spectrum between 225 MHz and 3.7 GHz.24 While Federal 

agencies use spectrum in the performance of their duties, it is acknowledged, both 

in the U.S. and elsewhere, that public-sector users have no incentive to use their 

spectrum allocation efficiently.25 Inefficient use implies that the government has 

more spectrum than it really needs, so Federal holdings are a likely source for additional spectrum for the private sector. 

However, I expect significant internal resistance within the government to transfer its spectrum to commercial users (we’ve already seen it), and I predict that Congress will eventually have to get involved.26 Why? First, recent reports from the government do not offer much hope for significant reallocations of spectrum any time 

soon.27 In fact, one recent government report rejects the whole idea of reallocating 

Federal spectrum to the private sector.28 Second, while many think of the present 

focus on government spectrum is a new issue, reallocating government spectrum to 

the private sector and improving the efficiency of government spectrum use and 

management is in fact a very old topic. A report by the NTIA released over twodecades ago outlines what remains to be the state-of-the-art thinking on spectrum 

policy reform with regard to public-sector use. Yet, essentially nothing has been 

done to implement the ideas. Changing a Federal license to a commercial license 

sets up to be a highly adversarial process, and I suspect Congress will end up in 

the role of final arbiter. 

C. Voluntary Incentive Auctions 

A promising mechanism for producing additional spectrum lies in voluntary incentive auctions, such as the one mandated by the Middle Class Tax Relief and Job 

Creation Act of 2012 (‘‘Spectrum Act’’). The present hope is that a large swath of 

broadcast television spectrum (upwards of 120 MHz) can be reallocated to mobile 

broadband services using the voluntary incentive auction, but whether a successful 

auction can be designed and implemented remains an open question. The objectives 

and constraints on the problem are mind boggling, and additional objectives and 

constraints are being proposed every day. There are some profoundly intelligent people working on it, so perhaps we can hope for the best without being labeled too 

optimistic. 

40 

29Sixteenth CMRS Report, supra n. 4 at Table 14. Other sources suggest this value may be 

a little high, but it has the virtue of being ‘‘official’’ in some sense. See, e.g., id., at Table 68. 30See, e.g., Remarks of FCC Chairman Julius Genachowski 2012 Consumer Electronics Show 

Las Vegas (January 11, 2012) (available at: http://hraunfoss.fcc.gov/edocsl public/ 

attachmatch/DOC–311974A1.pdf). 31 In the Matter of Policies Regarding Mobile Spectrum Holdings, FCC 12–119, 27 FCC Rcd 

11710, NOTICE OF PROPOSED RULEMAKING (rel. September 28, 2012). 32See, e.g., R. Krause, AT&T, Verizon Invite to TV Airwaves Auction Likely, INVESTOR’S BUSI- NESS DAILY (March 20, 2013) (available at: http://news.investors.com/technology/032013 

-648699-tmobile-sprint-seek-spectrum-limits-verizon-atandt.htm). Significantly, however, a coalition of broadcasters do not support incumbent exclusion rules. See, e.g., Reply Comments of The 

Expanding Opportunities For Broadcasters Coalition, FCC Docket No. 12–268 (March 10, 2013) 

(available at: http://apps.fcc.gov/ecfs/document/view?id=7022129556). 33 In the Matter of Policies Regarding Mobile Spectrum Holdings, Ex Parte Submission of the 

United States Department of Justice, WT Docket No. 12–269 (April 22, 2013) (available at: 

http://apps.fcc.gov/ecfs/document/view?id=7022269624) (hereinafter ‘‘DOJ Ex Parte’’). It should 

be noted that senior DOJ officials conceded under oath before the Senate Judiciary Committee 

that the Department made their filing after close and ‘‘quiet[]’’ cooperation with the Commission. See L. Spiwak, It’s Time for FCC/DOJ Inter-Agency Cooperation to Come into the Sunlight, 

@LAWANDECONOMICS (May 2, 2013) (available at: http://phoenix-center.org/blog/archives/1356). 34 As stated by Greg Rosston, former FCC Deputy Chief Economist and, more recently, Senior 

Economist for Transitions at the FCC: ‘‘. . . the FCC has tools to make facilities-based competition more likely and more viable. First and foremost, the FCC should get even more spectrum 

out into the marketplace. And it is probably important that the spectrum not continue to go 

VI. Who Gets It? The Allocation of Additional Spectrum in the Mobile 

Wireless Industry 

According to the most recent FCC report on competition in the mobile wireless 

industry, the industry has four nationwide providers and an HHI of about 2,873.29

In addition to these four nationwide providers, there are a number of regional providers serving certain markets and successful at doing so. By Merger Guideline’s 

standards, the industry is classified as ‘‘highly concentrated’’ since its HHI exceeds 

the 2,500 threshold for such classification. This ‘‘highly concentrated’’ label draws 

heightened regulatory, antitrust and Congressional scrutiny. 

The data also show that AT&T and Verizon are the Nation’s most successful mobile wireless firms, with each attracting the patronage of about one-third of wireless 

subscriptions, and about the same share of industry revenues. While the higher 

market shares of these two firms are simply manifestations of consumer choice, the 

persistent and growing relative success of the two has led some to call for policies 

to handicap the two larger providers in an effort to better equalize market shares 

among wireless providers. 

Efforts to handicap the larger providers continued success and to favor the smaller providers are particularly common in current discussions about spectrum allocation. In fact, the ‘‘who gets it’’ question is largely about whether the FCC should 

allow AT&T and Verizon to get more spectrum. The monopolization narrative—that 

is, the fear that giving the larger providers more spectrum will eventually produce 

substantial market power—is now boilerplate in secondary market transactions involving AT&T and Verizon and in establishing rules for spectrum auctions. 

In fact, when Congress was debating the voluntary incentive auction provisions 

of the Middle Class Tax Relief and Jobs Creation Act, many argued—including FCC 

outgoing Chairman Julius Genachowski 30—that the Commission should have the 

authority to adopt auction participation rules so that it could prevent an ‘‘excessive 

concentration of licenses’’ under Section 309(j)(3)(B) of the Communications Act to 

prevent the two largest CMRS providers—namely AT&T and Verizon—from participating in the auction. Congress rejected the idea, but did provide that ‘‘Nothing . . . 

affects any authority the Commission has to adopt and enforce rules of general applicability, including rules concerning spectrum aggregation that promote competition.’’ Given these Congressional parameters, the FCC has subsequently issued a 

Notice of Proposed Rulemaking to modify and tighten its spectrum screen, a policy 

change that could create de facto spectrum caps and exclude the largest CMRS players from the broadcast spectrum incentive auctions.31 A number of constituencies 

and the smaller competitors of the large firms filed comments in the incentive auction docket for the Commission to establish outright bright-line spectrum cap 

rules.32 So did the United States Department of Justice, as I will discuss in more 

detail in a moment.33

The argument for limiting AT&T and Verizon’s access to additional spectrum is 

simply an argument for spectrum caps, whether formal or informal. The argument 

for spectrum caps is plain enough: spectrum caps can be used to increase the number of wireless competitors by limiting how much spectrum any one firm can hold 

license to.34 The idea has also been extended to using spectrum caps to more evenly 

41 

into the hands of the two incumbent landline telephone companies that also have by far the 

most valuable wireless spectrum.’’ Testimony of Gregory L. Rosston, Federal Communications 

Commission En Banc Hearing on Broadband Network Management Practices (April 17, 2008) 

(available at: http://transition.fcc.gov/broadbandlnetworklmanagement/041708/rosston.pdf). 35See, e.g., P. Cramton, E. Kwerel, G. Rosston, and A. Skrzypacz, Using Spectrum Auctions 

to Enhance Competition in Wireless Services, 54 JOURNAL OF LAW & ECONOMICS S167–S188 

(2011), at p. S174. 36G. Ford, T. Koutsky and L. Spiwak, Competition After Unbundling: Entry, Industry Structure and Convergence, 59 FEDERAL COMMUNICATIONS LAW JOURNAL 331 (2007) (available at: 

http://www.phoenix-center.org/papers/FCLJCompetitionAfterUnbundling.pdf). 

distribute market share among established players, but I am unaware of any economic model or paper that supports this justification for a spectrum cap. 

The problem with the unqualified support for spectrum caps is that the blind acceptance of the idea rest on a number of questionable assumptions, including: (1) 

the number of firms serving the wireless industry is determined solely by spectrum 

holdings; (2) the success of firms is determined solely by spectrum holdings; and (3) 

more equal markets shares across firms is good for consumers. None of these assumptions is sound or useful for policy. Spectrum is but one input into the production of wireless services—giving a firm spectrum does not ensure its market or financial success (as we have seen, repeatedly). In addition, the support of a spectrum 

cap assumes that having more firms, or more equal market shares, is always better 

than having few firms. Economic theory does not support this idea generally.35 Also, 

my research shows that the argument for spectrum caps is much weaker when the 

existing institutional details of the wireless sector (spectrum exhaust) are considered. I will attempt to summarize that research here. 

A. Understanding Equilibrium Industry Structure 

As a first step, we must recognize that the number of firms supplying a market 

is finite and determined by economic forces, not wishful thinking. Building and 

maintaining a mobile wireless network, and building and maintaining a mobile 

wireless customer base for that matter, requires billions in capital expenditures. A 

carrier must secure from its customers sufficient revenues to pay operating expenses 

and support its large fixed costs. As the number of competitors grows, prices fall 

and each carrier’s customer base shrinks, reducing profits. At some point, there are 

simply too many competitors, and the losses lead to the exit of one or more firms. 

This exit of firms will continue until the remaining firms are profitable—then exit 

stops. Or, if the number of competitors is such that the profits are large enough to 

support an additional firm, then entry occurs, driving down prices and profits until 

further entry is no longer profitable—then entry stops. Eventually, when profits are 

positive but not too large to support another firm, both entry and exit stop. When 

it does, we have what we economists refer to as an equilibrium industry structure, 

a concept explained for policymakers in a Phoenix Center paper published in the 

FEDERAL COMMUNICATIONS LAW JOURNAL entitled Competition After Unbundling: 

Entry, Industry Structure and Convergence.36

In that paper, my co-authors and I observe that the equilibrium number of firms 

in any market will be determined by the intensity of price competition (which reflects the behavior of firms and not the count of firms), the size of the market, and 

the amount of fixed and sunk costs necessary to participate in the market. Large 

markets, other things constant, support more firms than do small markets. Markets 

with high fixed and sunk costs support fewer firms than do markets with low fixed 

and sunk costs, other things constant. Markets with aggressive price competition 

support fewer firms than markets with soft price competition, since lower prices 

mean lower profits and a diminished ability to incur the necessary capital expenditures. 

Mobile wireless networks are capital intensive, and history has shown that the 

supply-side characteristics of the market greatly limit the number of firms that can 

profitably serve the market. There will always be relatively few nationwide mobile 

wireless carriers. This is the reality we must deal with. 

The effect of the intensity of price competition on industry structure (i.e., the 

number of firms in this case) is exceedingly relevant for public policy as it flies in 

the face of the typical thinking on competition. The old thinking is that the number 

of competitors determines the degree of competition and thus prices and profits. 

Modern economic theory recognizes that the intensity of price competition affects 

the number of competitors, implying a feedback loop between structure and performance. Thus, in an industry such as telecommunications that requires firms to invest 

huge sunk and fixed costs, high industry concentration may actually be a symptom 

of intense price competition rather than a bellwether of weak competition. Similarly, 

many competitors may be a symptom of collusion, rather than competition. It’s an 

42 

37 National Broadband Plan, supra n. 10. 38Sixteenth Report, supra n. 7 at ¶ 61. 39 National Broadband Plan, supra n. 10 at p. 36. 40T.R. Beard, G. Ford, L. Spiwak and M. Stern, Wireless Competition Under Spectrum Exhaust, 65 FEDERAL COMMUNICATIONS LAW JOURNAL 79 (2012) (available at: http:// 

www.phoenix-center.org/FCLJSpectrumExhaust.pdf). 41More formally, we assume Cournot Competition in Quantities. 42DOJ Ex Parte, supra n. 33 at p. 15. 

admittedly different way to think about industry structure and competition, but 

nevertheless a modern and legitimate one, and the National Broadband Plan admits as much.37

What’s most important about the concept of equilibrium industry structure for the 

policy debate is that the number of competitors in the mobile wireless market alone 

says nothing about the state of competition or the performance of the industry. In 

some cases, the FCC recognizes this fact (in others, not so much). For example, the 

FCC observed in its Sixteenth CMRS Report, 

High market concentration is not synonymous with a non-competitive market 

or with market power—the ability to charge prices above the competitive level 

for a sustained period of time.38

And, in the National Broadband Plan, 

Building broadband networks—especially wireline—requires large fixed and 

sunk investments. Consequently, the industry will probably always have a relatively small number of facilities-based competitors, at least for wireline service. 

. . . The lack of a large number of wireline, facilities-based providers does not 

necessarily mean competition among broadband providers is inadequate. While 

older economic models of competition emphasized the danger of tacit collusion 

with a small number of rivals, economists today recognize that coordination is 

possible but not inevitable under such circumstances. Moreover, modern analyses find that markets with a small number of participants can perform competitively . . . 39

Put simply, the Commission has concluded that ‘‘concentration’’ bears no direct relationship with ‘‘competition.’’ This conclusion is profoundly significant and absolutely legitimate. This recognition is a huge leap forward in the agency’s thinking 

on competition, and an idea that needs to incorporated into everyone’s economic 

model of the industry. Given the costs of building networks, the industry is likely 

to be somewhat ‘‘concentrated’’ for the foreseeable future, but this does not imply 

a lack of competition or that regulation of the industry has anything to offer consumers, even in the absence of spectrum exhaust. Spectrum exhaust, however, adds 

an interesting (and unfortunately largely ignored) wrinkle to competition policy. Let 

me explain. 

B. Wireless Competition Under Spectrum Exhaust 

Despite acknowledging that spectrum exhaust is a real problem, it is readily apparent that neither the FCC nor the DOJ have incorporated spectrum exhaust into 

their thinking on competition and spectrum policy. In a recent paper also published 

in the FEDERAL COMMUNICATIONS LAW JOURNAL—Wireless Competition Under Spectrum Exhaust—my co-authors and I describe how competition works when firms 

compete under a capacity constraint.40 The result is indeed peculiar and in some 

ways counterintuitive, but the result is no less valid for being so. 

Our analysis of competition under spectrum exhaust is straightforward and based 

on common and uncontroversial assumptions about the industry. First, to sync up 

with common thought, we assume that price and profits fall as the number of competitors increases (that is, we adopt the Cournot Model of Competition).41 Second, 

we assume that there is a type of scale economy in spectrum. The DOJ explicitly 

accepts this technical assumption, recently stating ‘‘twice the spectrum may under 

certain conditions provide over twice the amount of capacity.’’ 42 I have provided a 

figure below (Figure 1) that illustrates the results in a straightforward manner. In 

the figure, the equilibrium price (P*) is on the vertical axis and the number of firms 

(n) is on the horizontal axis. 

Let’s start with the simple case where there is no spectrum constraint so that we 

have some type of benchmark for comparison purposes. Without a spectrum constraint, the equilibrium price (P*) falls as n (the number of firms) increases (along 

segment XYZ). This is the standard result from a common model of competition— 

price falls as the number of firms increases. 

43 

Now, let’s impose a binding spectrum constraint such that all capacity is used up. 

In other words, as much service as can be sold is sold. Significantly, once quantity 

is stuck at the constraint, price is stuck as well. Each quantity has a unique price 

associated with it per the demand curve. However, under the technical assumption 

about spectrum and capacity, we can get quantity unstuck by reallocating the fixed 

amount of spectrum to fewer firms, expanding output by taking advantage of the 

scale effect. Doing so increases capacity and thus output, and therefore lowers price. 

In the figure, the line segment labeled XYW illustrates the equilibrium price when 

the capacity constraint is binding. At the chosen parameter values (an arbitrary 

choice), the capacity constraint is binding at n = 2 (point Y). Thus, price falls as 

the number of firms increases from monopoly to duopoly, but then price rises (along 

segment YW) when the number of firms exceeds duopoly and the constraint is binding. So, while the standard framework holds that prices are lower with six firms 

than with two firms, under a spectrum constraint this need not be true. Indeed, in 

the figure, the six-firm outcome is essentially the same as the monopoly outcome. 

Obviously, this result is significant, because when there is a spectrum constraint, 

the number of competitors and price begin to move in the same direction. That is, 

reducing the number of competitors leads to lower prices. Stated another way, in 

the fact of spectrum exhaust, fewer competitors is good for consumers! This result 

seems odd, I know, but it follows from two largely uncontroversial assumptions, and 

merely reflects the intuition that if a finite amount spectrum is more efficiently allocated, it can be used to create more capacity. 

While I don’t mean to suggest that this model is the only way to think about competition in the industry, I think most would agree that these results are very important for public policy. At a minimum, the simplistic arguments about prices and industry concentration must be abandoned in favor of a more nuanced economic model 

of competition. Few have done so—yet. Here’s how you do it. If you find yourself 

thinking that prices would be lower and quality higher if there were more competitors (or a lower HHI) in the mobile wireless industry, or if someone is telling you 

that, then stop and recognize that there is very little to support this view and that 

the exact opposite may actually be true. 

C. Allocating Finite Spectrum Resources 

Another way to think about allocating a finite amount of spectrum among firms 

is to make the uncontroversial assumption that mobile wireless firms can offer higher quality and more innovative services if they have more spectrum to work with. 

We can think of the issue using a simple scenario. Say you have a fixed supply of 

spectrum—500 MHz—and you wish to allocate it. You could, theoretically, divide 

the spectrum among 500 firms, giving each 1 MHz, thereby having a large number 

of competitors (and thus low prices under the typical assumption about prices and 

the number of competitors). Of course, the firms could not do much if anything with 


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43One approach is to give spectrum to many firms, and then let them consolidate to the equilibrium. This approach is pretty much what has happened in the United States; it’s just that 

people are getting a little uncomfortable with how far the process has gone. 44See supra n. 11. 45 Id. 

so little spectrum, and even if they could all 500 would not survive financially given 

the large capital expenses required to build a network over which services are provided. I think everyone would agree this allocation choice would not be wise. At the 

other extreme, you could give all 500 MHz to a single firm. By doing so, the firm 

could offer some highly advanced services, but it would do so at monopoly prices. 

I don’t like this option any better than the other one. The policy question is, therefore, how to divide the spectrum up in the intermediate range between these two 

extremes.43

Last year, I published another paper in FEDERAL COMMUNICATIONS LAW JOUR- NAL—A Policy Framework for Spectrum Allocation in Mobile Communications—that 

addressed this very issue.44 Again, there are two key assumptions driving the analysis. First, in keeping with the widespread beliefs about competition, we again assume that the more competitors there are, the lower are prices (the Cournot assumption). Second, based on the technology of spectrum, we assume that more spectrum permits firms to offer more advanced services due to greater capacity and 

throughput. With the maximization of consumer welfare as our measure of good policy, the derived theoretical tradeoff is somewhat intuitive: In a setting with many 

firms with little spectrum, there are low prices (by the Cournot assumption) but relatively less advanced services (by the technology assumption). Alternately, in a setting with fewer firms with larger allotments of spectrum, there may be higher prices 

(by the Cournot assumption) but also more advanced services (by the technology assumption). There’s a tradeoff, obviously, and thus the question about allocating 

spectrum becomes an empirical one. 

Our analysis highlights several key components of the spectrum allocation decision. First, an incumbent-exclusion rule is not ‘‘pro-entry,’’ but instead seeks to select one form (price cutting) of entry over another (quality improving). Ad nauseam, 

we are informed that the economic benefits of advanced wireless services are likely 

to be very high, but providers need more spectrum to provide such services. If mobile providers are going to provide the high-quality broadband services many feel 

are essential for our economic, political and social well being, then providers (not 

the industry) need more spectrum. With a fixed supply of spectrum, this obviously 

means fewer providers. 

Second, with Cournot competition, the effect on price of adding more competitors 

is subject to diminishing marginal returns. That is, most of the price reductions 

from entry occur with the first two or three firms. (This fact forms the basis for the 

HHI thresholds in the Merger Guidelines.) When the number of firms exceeds a few, 

the potential for sizeable competitive price effects is low. Given that most U.S. consumers have access to four or more providers, the gains from additional entry are 

likely to be relatively small. Even if the price effects are moderate, these effects 

must be weighed against the gain in quality and innovation, which could be very 

large. 

In light of existing conditions (e.g., spectrum exhaust and multiple mobile wireless 

providers), we concluded in this paper that keeping incumbent firms out of a spectrum auction (or blocking transactions) is unlikely to be helpful, where helpful is 

measured against the standard of consumer welfare. Today, the quality problem is 

likely to be more important than the price problem. In fact, under spectrum exhaust, the price issue really isn’t an issue at all (as discussed above). 

The tradeoff derived in the paper is intuitive. Our particular interpretation of the 

facts is just that—a particular interpretation. But, even if one sees the facts differently, the theoretical tradeoff remains valid and useful. If incumbent firms are 

precluded from obtaining more spectrum—particularly successful firms serving large 

customer bases—then their quality of service will suffer, and consumers will suffer. 

Under existing conditions that include spectrum exhaust, an attempt to pump up 

the number of competitors through incumbent-exclusions rules, even assuming that 

doing so leads to more price competition, may not (and in our view is unlikely to) 

make American consumers better off. 

D. More Spectrum DOES NOT Mean More Competitors 

In our Policy Framework for Spectrum Allocation paper,45 we make another very 

important point that is typically ignored in the policy debate. That is, access to spectrum resources does not necessarily convey financial success, as spectrum is but one 

of many inputs necessary to provide service. Policymakers may want more mobile 

45 

46The figure is adapted from our paper A Policy Framework for Spectrum Allocation in Mobile 

Communications, id. 

providers and may be willing to throw spectrum at new entrants (or smaller incumbents) in an effort to make it so. The recent DOJ Ex Parte filing on the incentive 

auction certainly has this mindset. Unfortunately, just having access to spectrum 

does not imply that a firm can achieve financial success. Spectrum is but one input 

into the production of wireless services—giving a firm spectrum does not ensure its 

financial success (as we have seen, repeatedly). The construction and operation of 

a mobile wireless network requires billions in capital expenditures every year. While 

the companies spend billions on spectrum in auctions and acquisitions, the data indicates that for each $1 spent on spectrum wireless carriers spend about $5 on network build out. As discussed above, the sizable investments in infrastructure limit 

the number of firms that can serve the market. The construction and operation of 

a nationwide mobile wireless network requires billions in capital expenditures, and 

these investments limit the number of firms that can serve the market, even if spectrum was abundant and free. 

Moreover, history has shown that as spectrum resources have risen, the number 

of competitors has not. Contrary to popular belief, more spectrum does not imply 

more competitors. Figure 2 below illustrates the relationship between the market 

shares of the largest mobile telephony firms and the total MHz of spectrum made 

available by the FCC to such firms over the period 1993 through 2009.46 Total spectrum is shown by the shaded area in the figure and is rising over the entire time 

period. In 1993, there was 50 MHz of spectrum used for mobile telephony. Including 

all auctioned spectrum, this number rose to 361 MHz by 2009. 

The Concentration Ratio, CRn, is used to measure industry concentration. The 

Concentration Ratio is computed as the sum of the n largest firms in the market. 

That is, CR2 measures the summed market shares of the two largest firms, and 

CR5 the market share of the five largest firms. Both the CR2 and the CR5 are illustrated in the figure. Finally, the average revenue per minute for mobile telephony 

is provided. All data is computed at the national level. 

The figure shows clearly the following. First, the amount of spectrum has risen, 

yet industry concentration, as measured by the concentration ratio, has not declined. Thus, historical evidence does not support the notion that more spectrum 

means a lower level of industry concentration. Second, while concentration has risen 

over this interval, the price of mobile telephony has fallen consistently over the peVerDate Nov 24 2008 06:36 Apr 03, 2014 Jkt 075679 PO 00000 Frm 00049 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\87341.TXT JACKIE

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47 Average revenue per minute data is compiled from the FCC’s CMRS Reports (various 

years). The data is adjusted by the Consumer Price Index (www.bls.gov). 48DOJ Ex Parte, supra n. 33. 49 Id. at p. 11–2. 50See, e.g., Letter from House Energy & Commerce Committee Chairman Fred Upton et al., 

to the Federal Communications Commission (April 19, 2013) at 3 (available at: http:// 

energycommerce.house.gov/sites/republicans.energycommerce.house.gov/files/letters/20130419 

FCC.pdf). 51G. Ford and L. Spiwak, Equalizing Competition Among Competitors: A Review of the DOJ’s 

Spectrum Screen Ex Parte Filing, PHOENIX CENTER POLICY BULLETIN NO. 33 (May 2013) (available at: http://www.phoenix-center.org/PolicyBulletin/PCPB33Final.pdf). 52 Id. at p. 10. 

riod.47 Therefore, historical evidence also does not support the notion that higher 

concentration leads to higher prices. The latter result has important implications for 

the theory. If changes in concentration (or the number of firms) do not impact market performance, then the gains from an incumbent-exclusion rule are likely to be 

small and the net losses large. 

We note that these data cover many years, and technology has evolved over the 

years. As such, the trends in the figure are merely suggestive. Nevertheless, the historical data cannot be ignored and, if considered, provide important insights for the 

economic value of incumbent-exclusion policies. 

E. The Department of Justice’s Ex Parte Filing 

As mentioned above, the FCC has recently opened a Spectrum Screen NPRM 

docket. This docket is expected to influence the upcoming incentive auction for the 

broadcast spectrum, mostly by excluding AT&T and Verizon from participating in 

that auction (or at least limiting their participation). As also mentioned above, the 

Department of Justice (‘‘DOJ’’)—in full coordination with the FCC—filed an Ex 

Parte in the FCC Spectrum Screen NPRM docket encouraging the FCC to impose 

auction rules that exclude AT&T and Verizon from the auction in order to prop up 

the two smaller nationwide mobile wireless carriers, Sprint and T-Mobile.48 Specifically, the DOJ states that the broadcast television spectrum should be allocated ‘‘to 

enable smaller or additional providers to mount stronger challenges to large wireless incumbents.’’ 49 As such, the DOJ’s filing is unquestionably an attempt to equalize competition among mobile wireless competitors.50 It is an effort to design a market structure to their liking. Recently, Phoenix Center President Lawrence Spiwak 

and I published a lengthy comment on the DOJ’s filing entitled Equalizing Competition Among Competitors: A Review of the DOJ’s Spectrum Screen Ex Parte Filing, 

and I will summarize that work here.51

The primary thesis of the DOJ’s Ex Parte filing is that Sprint and T-Mobile 

should be pre-selected as the auction’s winners because AT&T and Verizon may buy 

the spectrum not to use but simply to keep it out of the hands of Sprint and TMobile. Specifically, the Department encourages the Commission to ‘‘consider the serious potential . . . that carriers with large market shares could pursue an input 

foreclosure strategy at auction . . . which harms all consumers of wireless services 

and can have an exclusionary effect on the carrier’s competitors.’’ 52 There are rules 

against just sitting on spectrum, but let’s set that point aside for the moment and 

focus on this foreclosure argument. 

According to the DOJ, auction bids have two possible sources: (1) use value and 

(2) foreclosure value. The sum of the two is the private value to the firm, which is 

the willingness to pay for the spectrum. ‘‘Use value’’ is the change in profits realized 

by obtaining the spectrum and using it to provide betters services that consumers 

demand, and ‘‘foreclosure value’’ as the change in profits realized by keeping the 

spectrum out of the hands of rivals. For clarity, consider a numerical example. Say 

Firm A’s current profit is $100. A Block of spectrum is up for auction. If Firm A 

gets the spectrum, then its profits rise to $130. If a rival of Firm A gets the spectrum, then Firm A’s profits fall to $80. The difference between getting the spectrum 

and losing the spectrum is $50, and this is the maximum willingness to pay (and 

maximum bid) of the spectrum in an auction. This private value to Firm A can be 

decomposed into $30 of use value ($130 – $100) and $20 of foreclosure value ($100 

– $20). 

As I describe in detail in the paper, the problem with the DOJ’s argument, as I 

see it, is that the efficiency of the auction outcome is not dependent on the presence 

or absence of foreclosure value. Foreclosure value merely arises from the scarcity 

of resources in input markets where somewhat specialized goods are sold. All incumbent firms in such cases have foreclosure value—they are worse off if their rivals 

get something they do not. So while the DOJ claims to embrace auctions as the best 

way to allocate spectrum, it in fact does so only when foreclosure values do not afVerDate Nov 24 2008 06:36 Apr 03, 2014 Jkt 075679 PO 00000 Frm 00050 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\87341.TXT JACKIE
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53DOJ Ex Parte, supra n. 33, at p. 12. 54P. Cramton, Spectrum Auctions, in HANDBOOK OF TELECOMMUNICATIONS ECONOMICS (2002). 55 Cramton, et al., supra n. 35. 56 Id., at p. S171. 

fect bids. Yet, foreclosure value affects the bids of all incumbent firms, so the Department’s argument is, in effect, a call to abandon spectrum auctions in favor of 

a comparative hearing (perhaps thinly veiled as an auction among pre-selected winners). 

Furthermore, there are good reasons to suspect that the use value of the larger 

carriers is bigger than that of the smaller carriers. Economic theory certainly points 

that way, as do a number of other factors, some of which were specifically mentioned by the DOJ. Larger firms are usually larger for good reasons (e.g., greater 

efficiency), and they serve larger customer bases by definition. Giving inputs to a 

more efficient firm is a wise policy and not something to be discouraged. 

Finally, as I see it, if auctions are to be used, then the presumption should be 

that the highest bidder wins—period. The burden of proof falls on those that want 

to promote a specific outcome by manipulating the auction. Auctions not only generate revenue, they allocate scarce resources to the highest bidder. The government 

no longer chooses who gets it, the bids do. The DOJ wants to choose the winners 

and craft an industry structure it likes, and to do so it calls for the FCC to favor 

Sprint and T-Mobile ‘‘[a]bsent compelling evidence’’ that AT&T and Verizon will use 

what spectrum they win.53 I respectfully disagree. Absent compelling evidence, do 

nothing—especially when basic economic analysis suggests that the use value of the 

bigger firms is larger than for the smaller firms. 

An auction among pre-selected winners isn’t an auction, it’s Kabuki Theater. If 

regulators, or the DOJ, want a specific outcome, then it should be upfront about it 

and not pretend to hold an auction. I doubt this command-and-control approach 

would be good for consumers, but at least a little honestly would be freshening. 

F. Incumbent Exclusion Rules May Have a Potential Adverse Impact on Auction 

Revenue 

Incumbent exclusion rules may also have an adverse in pact on auction revenues. 

Indeed, when it comes to the upcoming voluntary incentive auctions, there are numerous hands out—i.e., from this auction, we expect the proceeds to cover: (a) the 

cost of the auctions, the participating broadcasters’ cut; (c) re-packing costs; (d) a 

new, interoperable first responders’ network; and, oh yes, (e) revenue to pay off our 

spiraling deficit. Obviously, any policy that curbs revenues faces a high hurdle. Recognizing this fact, those favoring an auction among pre-selected winners have 

claimed that auction revenues may be larger if AT&T and Verizon are excluded. I 

find the argument profoundly weak, and the research typically cited for spectrum 

caps do not present a strong case. 

For example, economist Peter Cramton, a recognized expert in auction theory, 

states the following: ‘‘Typically, spectrum caps lower auction revenues.’’ 54 Words 

like ‘‘typically’’ should generally be used to establish presumption. Dr. Cramton does 

suggest one possible exception, whereby ‘‘non-incumbents may be unwilling to participate in the auction, knowing that the incumbents will ultimately win.’’ Yet, 

Sprint and T-Mobile are not ‘‘non-incumbents,’’ they are incumbents (as are many 

other firms). As such, they have both use and foreclosure value for the spectrum, 

and it is this private value that encourages them to participate in the auction. The 

decision not to participate is irrational. Indeed, the small firms will bid up to their 

private value in an attempt to win and, if not, to keep the big firms from getting 

the spectrum at extremely discounted prices. The bidding is relatively costless, but 

beneficial whether win or lose. 

In another paper often cited in regards to the revenue issue, the authors state, 

‘‘revenues in unrestricted auctions do not need to be strictly higher than those in 

auctions with spectrum caps or set-asides.’’ 55 This statement of ‘‘do not need to be’’ 

is obviously not very strong support for auction rules excluding large, successful, 

spectrum-hungry wireless carriers. Ambiguity without evidence is not a strong 

motivator. Also, the theory relates only to the behavior of non-incumbents, not incumbents, and there are numerous incumbents. Also, in the same discussion, the 

author’s note other risks, including the possibility that spectrum caps ‘‘may prohibit 

efficient aggregation of spectrum.’’ 56 Their point is similar to the one made above 

regarding the tradeoff between a price competition and quality improvements. As 

long as spectrum exhaust is a concern, the way spectrum is allocated among existing carriers is critical. Additional entry, thereby dividing up a limited amount of 

spectrum even further, may not be beneficial but harmful. Today, new entry into 

48 

57 Cable Consortium Acquires Spectrum Licenses Covering National Footprint (October 5, 

2006) (available at: http://corporate.comcast.com/news-information/news-feed/cable-consortium 

-acquires-spectrum-licenses-covering-national-footprint); M. Reardon, Regulators OK Verizon’s $3.9B bid to Buy Cable Spectrum, CNET (August 16, 2012) (available at: http://news.cnet.com/ 

8301-13578l3-57494498-38/regulators-ok-verizons-$3.9b-bid-to-buy-cable-spectrum). 58See A. Sharma and A. Schatz, AT&T, Verizon In Airwaves Grab; A Win for Google? WALL

STREET JOURNAL (March 21, 2008) (available at: http://online.wsj.com/article/SB12060 

3843805652459.html); C. Albanesius, Qualcomm Selling 700MHz Spectrum to AT&T for $1.93B, 

PCMAG (December 10, 2010) (available at: http://www.pcmag.com/article2/0,2817,237 

4551,00.asp). 59Library of Congress—Copyright Office, 37 CFR Part 201, Docket No. 2011–7, Exemption to 

Prohibition on Circumvention of Copyright Protection Systems for Access Control Technologies, 

FINAL RULE, 77 Fed Reg. 65,260 (October 26, 2012). 60See, e.g., ASSOCIATED PRESS, Verizon Wireless Says iPhone 5 won’t be ‘‘Relocked’’ 

(September 24, 2012) (available at: http://www.nbcnews.com/technology/verizon-wireless-saysiphone-5-wont-be-relocked-1B6078242). 61http://store.apple.com/us/buy/home/shopliphone/family/iphone5. 

the mobile wireless market seems unlikely—the profits aren’t there. So policies designed to promote additional entry are unlikely to bear much fruit. 

When theory is ambiguous, the question becomes an empirical one. Empirical evidence also provides little support for the argument. In the 700 MHz auction, both 

AT&T and Verizon participated. The reserve price for the B block in that auction 

was $1.37 billion—it sold for $9.1 billion. The reserve block for the A block in that 

auction was $1.8 billion, and it sold for $3.96 billion. While the C Block sold for just 

over its reserve price, that block was encumbered with network neutrality obligations while the others were not. Notably, in the 700 MHz auction, there were 101 

winning bidders. 

As for non-incumbent participation, we have seen much of it in the past, and have 

good reason to expect it in the future. SpectrumCo, a joint venture mainly of cable 

companies, turned a tidy profit on AWS spectrum licenses its acquired for $2.37 billion and sold to Verizon for $3.9 billion.57 The large incumbents were active participants in that auction. T-Mobile also won spectrum in that same auction, but didn’t 

get exactly what it wanted because it was outbid on some blocks by Verizon (thereby 

providing motivation for Verizon’s exclusion from the broadcast incentive auction). 

Qualcomm won licenses in the 700 MHz auction for which it paid $558 million, and 

later flipped to AT&T for $1.93 billion.58 Thus, I suspect there will be plenty of bidders even if AT&T and Verizon participate. 

VII. Other Factors Impacting the Wireless Ecosystem 

Spectrum is central, but there are other issues affecting wireless policy today. The 

issue of handset unlocking is one that receives a great deal of attention, but its import is a mystery to me. While this issue has been perking around telecom circles 

for years, it has come back to the forefront as the result of the Librarian of 

Congress’s recent decision to deny requests to exempt handset unlocking of new 

phones from the anti-circumvention petitions of the Digital Millennium Copyright 

Act (‘‘DMCA’’).59

There are a couple of things that, to me, make this issue a non-issue. First there 

is a popular misconception that the only thing that keeps a mobile phone from 

working on a competitor’s network is the locking function. This assumption simply 

is not true. U.S. mobile providers use a variety of different technologies (CDMA, 

GSM, LTE, IDEN, etc.) and, as such, a handset must match the carrier’s network 

technology. Stated in practical terms, my AT&T GSM iPhone will not work on 

Verizon’s or Sprint’s CDMA networks (and vice versa). Equally as important, many 

carriers make network-specific enhancements to take advantage of certain device 

functionalities, so a consumer may not get the full benefits of an ‘‘unlocked’’ 

smartphone if he or she tries to use it on a different network.60

Second, under the Librarian’s decision, consumers are legally free to unlock ‘‘legacy’’ phones, so the decision has no impact on a secondary market for phones. A simple eBay search reveals that the secondary market for handsets is thriving. 

Third, most wireless carriers will unlock your phone for you, and some don’t even 

lock them to begin with, even when subsidized. 

Fourth, anyone can walk into a mobile wireless store and purchase a brand new 

unlocked handset. Such a device can also be purchased online, say at Amazon.com 

or Apple.com. Thus, it appears that the debate is not about access to an unlocked 

phone, but about having to pay the full price for one. 

Let me put the issue into context by proving you with an example I constructed 

earlier this year. As you know, a state-of-the-art unlocked phone can be quite expensive—for example, according to Apple’s webpage, a new entry-level unlocked iPhone 

5 will run you about $649.61 By signing a two-year contract with AT&T, however, 

49 

62http://www.att.com/esupport/article.jsp?sid=KB414532&cv=820&title=What%20are%20the 

%20eligibility%20requirements%20for%20unlocking%20iPhone%3F#fbid=ImedVl5M2Y8. 63http://support.apple.com/kb/ht1937. 64G. Ford, T. Koutsky and L. Spiwak, A Policy and Economic Exploration of Wireless 

Carterfone Regulation, 25 SANTA CLARA COMPUTER & HIGH TECH. L.J. 647 (2009) (available at: 

http://www.phoenix-center.org/papers/SantaClaraCarterfone.pdf). 

that same phone runs you only $199, a $450 discount off the retail price for an unlocked phone. Not a bad deal, even considering the early termination fee of $325, 

which declines by $10 per month of the contract and need not ever be paid by adhering to the term. Of course, the ability to offer consumers heavily-discounted equipment requires the customer to stick around long enough to make the arrangement 

sensible for the carrier. As an incentive to adhere to the agreement made between 

the carrier and the customer, wireless providers typically impose early termination 

fees and/or ‘‘lock’’ the device to their networks for the duration of the contract. So, 

when a consumer gets a $649 phone for $199, is it that unreasonable to expect a 

little commitment from the consumer in return? Most rational adults would think 

not, particularly when customers freely enter into that contractual arrangement. 

When the contract is up, the customer is free to unlock the phone.62 (Indeed, so long 

as the phone is out of contract, a simple web search reveals that the major U.S. 

carriers are more than willing to unlock phones upon reasonable request.63) If a consumer doesn’t like the idea of a locked phone and being bound by the terms of a 

service contract, then that consumer can spend $649 up-front and get an unlocked 

phone. But, if the carrier hands you a $649 phone for $199, there’s obviously and 

reasonably a catch. 

When it comes to things like locking, early termination fees, and contracts, it is 

important to keep in mind that the terms and conditions under which highly-discounted phones are provided are not arbitrary; they have a purpose. In my published paper entitled A Policy and Economic Exploration of Wireless Carterfone Regulation,64 my co-authors and I provide a formal economic evaluation of contracts, 

device locking, and other conditions relevant to handsets. Critics are right that 

these terms and conditions are intended to adhere the customer to a particular carrier, but the practices are neither anti-competitive nor anti-consumer for doing so. 

They are motivated by a desire to better serve the customer. Such practices increase 

the complementarity of the handset and the services, thereby providing stronger incentives to subsidize the purchase of handsets. These market behaviors are a natural response to the desires of consumers to have the latest and greatest technology 

at very low prices. As such, locking, term contracts, early termination fees, and 

other conditions are fully compatible with competitive outcomes and a ban on such 

arrangements is more likely to reduce competition than it is to increase it. Without 

question, a ban will increase the prices for handsets and may do so without any offsetting price decrease for wireless network services. Eliminating contracts and 

handset locking, therefore, is likely to be a bad deal for consumers, but, in the end, 

that’s for the consumers to decide. I am certain that the carriers would love to be 

out of the handset subsidy business—it’s a cost driver for them. Yet, they do it, not 

because they want to, but because consumers demand it. 

VIII. Conclusion 

Mr. Chairman, thank you again for the invitation to testify today. I welcome any 

questions the Subcommittee may have. 

Senator PRYOR. Thank you. 

Ms. Derakhshani. 

Oh, was that over? 

Mr. FORD. I looked right over there and it was zero, I promise, 

and I thought it wasn’t working—— 

[Laughter.] 

Mr. FORD.—I couldn’t be through 5 minutes yet. 

Senator PRYOR. Ms. Derakhshani. 

Thank you. 

STATEMENT OF DELARA DERAKHSHANI, POLICY COUNSEL, 

CONSUMERS UNION 

Ms. DERAKHSHANI. Chairman Pryor, Ranking Member Wicker, 

and members of the Subcommittee, on behalf of Consumers Union, 

50 

the policy and advocacy arm of Consumer Reports, thank you for 

the opportunity to testify before you today. 

Consumer Reports is the world’s largest independent not-for-profit product testing organization with a mission to ensure a fair and 

just marketplace for consumers. We appreciate being included in a 

conversation about wireless. 

Wireless has become an essential part of consumers’ lives. A 

growing portion of the population has chosen to cut the cord and 

replace their landline phones with wireless voice service, while 

many others, including those in rural areas, low-income areas, and 

communities of color, rely on their cell phones as their only means 

of accessing the Internet. In light of the growing importance of 

wireless, we’d like to highlight a number of practices that unfairly 

reach into consumers’ pocketbooks and limit competition and consumer choice: 

First, we’re concerned about charges on consumers’ wireless bills. 

We were pleased that the industry and the FCC came to a voluntary agreement on bill shock, and that carriers now provide free 

alerts to consumers as they approach their plan limits for data, 

voice, and texting, and before they incur international roaming 

charges. The FCC recently announced that all participating carriers are now in compliance with this voluntary agreement. At Consumer Reports, we plan to continue to monitor carrier performance 

closely to ensure that these alerts work for everyone as intended. 

Unfortunately, we still have concerns about cramming, or the 

placement of unauthorized charges on consumers’ wireless bills. 

Several studies have suggested that cramming costs consumers billions of dollars each year. And as we have explained in Consumer 

Reports, these charges often go unnoticed because they can be as 

small as 99 cents or described in a way that makes them sound 

like legitimate phone-related charges. We were disappointed that 

last year’s FCC landline cramming rules did not extend to wireless. 

Cramming is just as serious a problem for wireless consumers, and 

arguably even more so in light of the ease with which it can occur. 

In the wireless context, all a crammer needs in order to initiate an 

unauthorized charge is a customer’s active cell phone number. We 

appreciate the Committee’s continued active pursuit of this concern, including the letters that Chairman Rockefeller recently sent 

to the four major carriers, identifying cramming as a growing 

threat for wireless consumers. 

Third, we’re concerned about the new legal barriers to unlocking 

cell phones. Last fall, the Library of Congress phased out the longrecognized right of consumers to unlock their mobile phones for use 

on other carriers’ networks. As a result, what was once legally protected is now potentially subject to criminal prosecution. We’re 

pleased that a number of members of this committee have introduced or cosponsored bills to remedy the issue. 

In our view, consumers should be able to use the mobile devices 

that they have purchased as they see fit, and our research indicates that consumers agree. According to a nationwide poll by Consumer Reports in 2011, an overwhelming 96 percent of respondents 

felt that consumers should be able to keep their existing handsets 

when changing carriers; 88 percent believed that handsets should 

work on any cellular network that they choose. 

51 

The FCC began a proceeding last year to promote interoperability among wireless devices, and we support efforts that allow 

consumers to use the devices that they have purchased on any network of their choice. 

Fourth, we remain concerned about the structure of traditional 

wireless contracts and early termination fees, which create artificial barriers to competition and consumer choice. These policies 

lock consumers into their contracts and deter new carriers from entering the market. When consumers have a hard time switching 

competitors, carriers are under less pressure to respond to consumer demands. Furthermore, when the cost of expensive devices 

are built into carriers’ service contracts, a consumer who may not 

necessarily want or need a new mobile device is forced to pay for 

that device over the course of a long-term contract. Indeed, Consumer Reports has found that customers who are able to shop for 

the best deal on each of these purchases could benefit significantly 

from lower prices. Just recently, in March 2013, we reported, online, that consumers who switch from long-term services to no-contract services can save hundreds of dollars over a 2-year period. 

Fifth, we’d like to express our continued support for the Universal Service Fund’s Lifeline program. We believe that the program plays a key role in expanding the benefits of communications 

services to those who would otherwise be unable to afford it. We 

remain concerned about any proposals to exclude wireless from the 

Lifeline program, and we support the program’s expansion to 

broadband. Any efforts to expand broadband access to Americans 

should not leave behind the communities that can benefit from it 

the most. 

Consumers have much to gain if more spectrum is made available for commercial wireless services, but freeing up additional 

spectrum won’t be beneficial to consumers unless future spectrum 

auctions actually promote competition in this market. The two largest providers of wireless services today are positioned to dominate 

the auctions unless the Government puts in place appropriate rules 

to also give small carriers the opportunity to bid on this important 

limited resource. Consumers will also benefit if the Government 

agrees to set aside sufficient spectrum for unlicensed use. These 

goals need to be at the forefront of any future policy decisions in 

order to promote competition and consumer welfare. 

I thank you for the opportunity to testify, and I look forward to 

your questions. 

[The prepared statement of Ms. Derakhshani follows:] 

PREPARED STATEMENT OF DELARA DERAKHSHANI, POLICY COUNSEL, 

CONSUMERS UNION

Chairman Pryor, Ranking Member Wicker, and Members of the Subcommittee: on 

behalf of Consumers Union, the policy and advocacy arm of Consumer Reports, 

thank you for the opportunity to testify before you today. Consumer Reports is the 

world’s largest independent, not-for-profit product testing organization. We rate 

thousands of products and services annually, provide overviews and comparisons, 

conduct customer satisfaction surveys, and publish tips on how consumers can save 

money and protect themselves against abusive practices. We appreciate being included in a conversation about wireless in your ongoing examination into the state 

of the telecommunications market. 

52 

1See Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993, Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile Wireless, Including Commercial Mobile Services, WT Docket No. 11–186, Sixteenth Report, FCC 13–34 (rel. 

Mar. 21, 2013) (‘‘Sixteenth Competition Report’’) (noting that 55.5 percent of mobile wireless consumers owned smartphones as of July 2012, up 41 percent from the previous year). 2Sixteenth Competition Report at 26. 3 ‘‘Bill Shock’’ Is Common, CONSUMERREPORTS.ORG, Jan. 2011, available at http:// 

www.consumerreports.org/cro/magazine-archive/2011/january/electronics/best-cell-plans-andproviders/cell-phone-bills/index.htm (visited May 31, 2013) (finding that one in five respondents 

had received an unexpected charge on a bill over the past twelve months). 

Introduction 

Wireless service is becoming an evermore essential part of our lives. Smartphone 

penetration levels continue to increase,1 and innovative new technologies and applications are improving consumers’ lives in never-before-seen ways. Significantly, a 

growing portion of the population has chosen to ‘‘cut the cord’’ and replace landline 

phones with mobile wireless service. According to the FCC, thirty-four percent of 

adults lived in wireless-only households by the second half of 2012.2 Others—including consumers in rural areas, low-income communities, and communities of color— 

rely on their cell phones as their only means of accessing the Internet. In light of 

the growing importance of wireless, we would like to bring attention today to a 

number of practices that delve into consumers’ pocketbooks and limit competition 

and consumer choice. Some of the issues are unique to the wireless arena, while others are not; but all of them deserve attention in light consumers’ heavy reliance on 

wireless technologies. 

Our comments today are guided by three basic principles. First, all consumers 

should have access to quality, affordable wireless services. Second, consumers 

should not be unduly limited in their ability to choose among the products, service 

plans, and carriers that best suit their particular needs. Third, carriers should provide the tools and information necessary for consumers to make meaningful choices 

and protect themselves against abusive practices. 

With these principles in mind, our comments today will focus on wireless bill 

shock and cramming, the new legal barriers to unlocking cell phones, early termination fees, the need to preserve wireless as part of the Lifeline program for lowincome consumers, and spectrum policy. 

Bill Shock 

First, bill shock. For years, Consumer Reports received stories from consumers 

who had been hit with hundreds—even thousands—of dollars’ worth of surprise 

charges on a single month’s bill for exceeding plan limits on data, voice, and texting, 

or for incurring international roaming charges.3 In our view, the underlying problem 

was that consumers did not have the tools they needed to keep track of their plan 

limits. We supported action by the Federal Communications Commission (FCC) to 

remedy this and filed comments in its proposed rulemaking proceeding. 

In October 2011, the FCC and major wireless carriers agreed to a voluntary plan 

under which carriers would begin providing free alerts to consumers as they approached their plan limits for data, voice, and texting—and before they incurred 

international roaming charges. Consumers Union joined the FCC and CTIA in announcing the agreement in 2011, and we are pleased that the FCC recently announced in April that all participating carriers are in compliance with the agreement, which protects 97 percent of the population from bill shock. 

We are glad to have been part of the consumer education and advocacy process 

that resulted in these protections, but we plan to continue to closely monitor carrier 

performance and engage in a dialogue with consumers to ensure that these alerts 

work for everyone as intended. 

Cramming 

A second issue of concern is cramming, or the placement of unauthorized charges 

by third party services on a consumer’s telephone bill. Several studies have suggested that cramming costs consumers billions of dollars each year. As we’ve explained in Consumer Reports, these charges often go unnoticed by consumers because they can be as small as 99 cents or described in a way that makes them sound 

like legitimate phone-related charges. 

We were pleased that the FCC adopted new cramming rules last year to better 

help consumers identify third-party charges in the landline context. These rules require carriers to more clearly separate third-party charges from other charges on 

a phone bill. The new rules also require carriers to notify consumers of the option 

to block all third-party charges if the carrier provides that option. However, we were 

disappointed that the FCC did not extend these rules to wireless cramming. CramVerDate Nov 24 2008 06:36 Apr 03, 2014 Jkt 075679 PO 00000 Frm 00056 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\87341.TXT JACKIE
53 

4Senate Committee on Commerce, Science, & Transportation, Press Release, Rockefeller Vows 

to Avert Wireless Cramming Scams, Mar. 1, 2013, available at http://www.commerce.senate 

.gov/public/index.cfm?p=PressReleases&ContentRecordlid=cd0edc13-b355-4d4e-9619-7035329 

daa1a (visited May 31, 2013). 5Sixteenth Report at para. 308 (noting that churn rates for post-paid services are significantly 

lower than pre-paid contracts, due in part to existence of early termination fees). 6 AT&T, Early Termination Fees, available at http://www.wireless.att.com/learn/articles-resources/early-term-fees.jsp (visited May 31, 2013) (listing early termination as high as $325 for 

advanced phones); Verizon Wireless, Customer Agreement and Important Information, available 

at http://youreguide.vzw.com/legal-customer-agreement/ (visited May 31, 2013) (listing early 

termination fees as high as $350 minus); Sprint, Learn About Early Termination Fee, available 

Continued 

ming is just as serious a problem for wireless consumers—and arguably even more 

so in light of the ease with which it can occur. In the wireless context, for example, 

a crammer needs only to confirm that an active cell phone number exists before initiating an unauthorized charge. 

Consumer Reports has been alerting readers to the practice of cramming and advising them to be extra vigilant in reviewing their mobile phone bills for unexplained charges. However, we strongly believe more needs to be done to help consumers identify third-party charges and to keep unauthorized charges from ending 

up on their bills in the first place. 

We very much appreciate the Committee’s active pursuit of this concern, including 

its 2011 investigation into cramming, as well as the letters that Chairman Rockefeller recently sent to the four major carriers identifying cramming as a growing 

threat for wireless consumers.4

Unlocking Mobile Devices 

Third, we are concerned about the new legal barriers to unlocking mobile phones. 

Last fall, in its review of the Digital Millennium Copyright Act, the Copyright Office 

extinguished the long-recognized right of consumers to unlock their mobile phone 

for use on other carriers’ networks. As a result, what had once been legally protected is now potentially subject to criminal prosecution. 

Consumers Union recently sent letters to the FCC Commissioners and to the 

Commerce Committee, among others, encouraging efforts to remedy the uncertainty 

created by the Copyright Office’s decision. We are pleased that President Obama 

has signaled a willingness to engage on this issue and that the FCC is currently 

looking into the matter. A number of bills have been introduced in Congress to restore the legal protection removed by the Copyright Office’s decision, including bills 

introduced and co-sponsored by members of this committee. We thank you for your 

recognition of this important issue and support your efforts to craft an effective solution that benefits consumers. 

In our view, consumers should be able use the mobile devices they have purchased 

as they see fit. For example, they should be permitted, where feasible, to adapt their 

mobile device for use abroad with a foreign carrier. They should be permitted to sell 

or give a mobile device they own to someone else for use with the carrier of the new 

owner’s choice. And they should be able to obtain an unlocked mobile device themselves, and adapt it for use with the carrier of their choice. All of these uses make 

sense for consumers, and all should be legal and available. 

In fact, a 2011 nationwide poll conducted by Consumer Reports makes it clear that 

consumers themselves agree. According to our poll, an overwhelming ninety-six percent of respondents felt that consumers should be able to keep their existing 

handsets when changing carriers. Furthermore, eighty-eight percent of respondents 

believed that their handset should work on any cellular network that they choose, 

while seventy-three percent said that they would support a government rule that 

requires handsets to be compatible with all U.S. cellular services. 

For years, our organization has advocated on the related issue of interoperability. 

We were pleased to see the FCC begin a proceeding to promote interoperability 

among wireless devices last year and support efforts that allow consumers to use 

the devices that they have purchased on the networks of their choice. 

Early Termination Fees and the Traditional Long-Term Contract 

Fourth, we remain concerned about early termination fees and the structure of 

the traditional wireless service contract. This model builds in the cost of expensive 

handsets into the long-term service contract, creates artificial barriers to competition and consumer choice, and implements early termination fees that dissuade consumers from switching among mobile service providers.5 Although carriers generally 

prorate these early termination fees, customers who switch before their contract expires can still incur charges as high as $350.6

54 

at http://support.sprint.com/support/article/Learnlaboutlearlylterminationlfee/case-sp06 

1027-20110823-171256 (visited May 31, 2013) (listing early termination fees as high as $350). 7Kevin J. O’Brien, Americans Paying More for LTE Service, NY TIMES, Oct. 15, 2012, available at http://www.nytimes.com/2012/10/15/technology/americans-paying-more-for-lte-service 

.html?lKr=0 (visited May 31, 2013) (noting that LTE services in the U.S. cost, on average, 

three times the European average). 8For example, in January, AT&T CEO Randall Stephenson said he would consider allowing 

consumers to pay for their own smartphones in exchange for a lower rate. In March, T-Mobile 

announced a pricing plan that effectively separates the charge for the service from the charge 

for the device. In response, AT&T recently introduced a wireless no-contract cell service. See 

http://www.att.com/gen/press-room?pid=24185&cdvn=news&newsarticleid=36421 (visited May 

31, 2013). In April, Verizon CEO Lowell McAdam said he would consider ending two-year contracts if there were consumer demand for it. See Roger Cheng, Verizon CEO Says He’s Open 

To Dropping Contracts, CNET NEWS, Apr. 3, 2013, available at http://news.cnet.com/8301- 

1035l3-57577842-94/verizon-ceo-says-hes-open-to-dropping-contracts/ (visited May 31, 2013). 9See Change.org, Petition, Verizon: Get Rid of Contracts for Wireless Services, available at 

https://www.change.org/petitions/verizon-get-rid-of-contracts-for-wireless-service (visited May 

31, 2013); Brandon Griggs, Thousands Petition Verizon To Nix Wireless Contracts, CNN.COM, 

Apr. 17, 2013, http://www.cnn.com/2013/04/16/tech/mobile/verizon-petition-contracts/ 

index.html (visited May 31, 2013). 

Wireless carriers justify these fees as necessary to recoup the cost of providing 

consumers with mobile devices below their regular cost. But in many ways, embedding the cost of a mobile device into a contract is a bad deal for consumers. For 

example, under this traditional structure, a consumer is forced to pay for a new mobile device over the course of a contract even if the consumer does not want or need 

a new mobile device. Furthermore, early termination fees lock consumers into these 

long-term contracts. Although carriers argue that they have strong incentives to 

keep customers happy, the fact remains that if consumers have a harder time 

switching to a carrier’s competitor, then carriers are under less pressure to respond 

to customer demands. 

If consumers were able to shop for the best deal on each of these purchases separately, they could benefit significantly from the lower prices, improved quality, and 

greater innovation and variety that healthy competition would encourage among 

both mobile device manufacturers and wireless service providers. In Europe, for example, where LTE wireless service is sold separately from the mobile device, one 

study shows that the cost of the service is only about a third of its cost in the 

United States.7

We are encouraged to see that wireless carriers are beginning to consider offering 

consumers more innovative choices than the traditional long-term contract.8 This 

emerging development certainly appears to be catching the attention of consumers, 

as evidenced by a recent grass roots online petition to Verizon that argues against 

long-term service contracts and has garnered over 150,000 signatures.9

Protecting the Wireless Lifeline Program 

Finally, we would like to express our continued support for the Universal Service 

Fund’s Lifeline program. Fifteen million low-income families depend on this program, which we believe plays a key role in expanding the benefits of communications services to those who would otherwise be unable to afford them. 

We recognize that the FCC recently took steps to appropriately address problems 

of waste, fraud, and abuse. These efforts have already resulted in $200 million of 

savings and will continue to save millions, while ensuring that the funds are targeted to consumers who need telecommunications services the most. 

Furthermore, we remain concerned about any proposals to exclude wireless from 

the Lifeline program. To do so would be to deprive the millions of low-income families who depend on cell phones for basic access to vital telecommunications services. 

The importance of this program is especially clear in light of the consumers’ increasing shift away from landline service. As discussed earlier, many Americans are 

choosing to replace their landline phones with mobile phones, while others—including many consumers in rural areas—rely on their cell phones as their only means 

of accessing the Internet. 

We support the FCC in its efforts to get affordable broadband to as many people 

as possible, without leaving behind low-income consumers and the groups who need 

it the most. 

Spectrum 

Consumers have much to gain if more spectrum is made available for commercial 

wireless services. But consumers won’t be able to realize the benefits of this additional available spectrum unless future spectrum auctions actually promote competition in this market. The two largest providers of wireless services today, AT&T and 

55 

Verizon, are positioned to dominate the auctions unless the government puts in 

place appropriate rules to also give small carriers the opportunity to bid on this important limited resource. Consumers also will benefit if the government agrees to 

set aside spectrum for unlicensed uses. These goals need to be at the forefront of 

future spectrum policy decisions. 

Conclusion 

These issues highlight some of the ways in which consumers have borne the brunt 

of a wireless marketplace that is not as sufficiently competitive and consumer 

friendly. Wireless technology holds incredible promise for all of us, but policymakers 

and regulators play an important role in helping ensure that—as wireless technology becomes evermore prevalent in our day-to-day lives—it delivers quality, affordability, and choice to consumers. We appreciate the Subcommittee’s attention to 

these important issues and I look forward to your questions. Thank you. 

Senator PRYOR. Thank you. 

Let me, if I may, just start with Mr. Webster. You spent some 

time, in your opening statement, talking about Wi-Fi and how important Wi-Fi is. Are you saying that the Wi-Fi space can get too 

crowded? 

Mr. WEBSTER. Well, the Wi-Fi space actually—most certainly can 

get too crowded, Senator. That’s why additional spectrum is needed 

in the unlicensed arena just as much as it is in the licensed arena. 

Now, there are, no question, technological innovations that can 

work to minimize some of that crowding, but that’s not going to be 

enough. The growth that we are having on our networks, across the 

board, especially in mobility, which is really very much inherently 

tied to networking growth, in general, means that we’re going to 

need additional spectrum to complement those innovations. 

Senator PRYOR. I think that you mentioned the 5 gigahertz spectrum—— 

Mr. WEBSTER. Yes. 

Senator PRYOR.—as a possible—— 

Mr. WEBSTER. That’s correct. 

Senator PRYOR.—alternate place to go. And my understanding, 

though, is—maybe the auto industry is trying to use that for the 

vehicle-to-vehicle communication. Is that right? What—— 

Mr. WEBSTER. That’s correct. In fact, the—both the auto industry 

and the telecommunication industries are key customer bases or 

sectors of Cisco Systems, and we want to work a win-win situation—first and foremost, based on making sure that the use of this 

spectrum by automobiles is absolutely safe. But, if there is underutilization of spectrum, is there an opportunity to have that spectrum shared by other purposes? That’s something that we very 

much would like to investigate and work with the FCC to see if 

that is an option—opportunity—so we can provide that win-win situation to both sectors. 

Senator PRYOR. OK. 

Mr. Nagel, same questions for you, really. Wi-Fi—you mentioned 

Wi-Fi in your statement. How do we manage this, going forward? 

I mean, it looks like more and more people want to utilize Wi-Fi; 

it seems to be more and more prevalent. And you talked about the 

flexibility of these devices, et cetera, but do you think the 5 

gigahertz is the way to go? 

Mr. NAGEL. Well, I think, you know, it’s—when you look at 

what’s going on in Wi-Fi, it’s really no different across whether it’s 

unlicensed or on licensed. The spectrum utilization is significantly 

56 

increasing. And I think even, you know, Mr. Webster had said that, 

between 6 years ago to today, the increase has been over 600 percent. And I think what happens is, the spectrum availability hasn’t 

really increased. And so, you’re getting more and more usage in the 

Wi-Fi space. 

So, the spectrum is really the real estate. If you build more and 

more houses in that real estate, it just gets crammed. And I think 

that’s where we are. 

So, the importance of the 5 gigahertz is really twofold. I mean, 

first is, is that we already are using Wi-Fi in the 5 gigahertz space, 

on the high end. The second part about the 5 gigahertz—so, we can 

easily digest additional spectrum in that band—and that the more 

that we can put in the band next to our other existing spectrum, 

we can do wider channels. Wider channels mean faster and faster 

services. So, part of why the 5 gigahertz band is important to us 

is that it makes—it allows us to not just add more customers, but 

to provide more speed to those same customers. So, that’s one 

piece. 

The other piece is, when you think about the 5 gigahertz, there 

are very, very few, sort of, greenfield environments where you can 

utilize spectrum and make as much benefit in the 5 gigahertz you 

have today. There’s about 555, sort of, allocated megahertz of spectrum in the 5 gigahertz band, but only 100 is utilized for unlicensed Wi-Fi. So, that’s less than 20 percent. And so, what’s great 

about the 5 gigahertz is, it is available. Wi-Fi can work in a sharing environment. We understand there are incumbents. We have 

no desire to interfere with those incumbents. Wi-Fi, by its very nature, is a secondary service. So, it’s built so that it can share. 

I think what’s really important—you mentioned the vehicle-to-vehicle—I think what’s really important is—there’s no question, Mr. 

Webster’s right, that we can solve the sharing problem with that 

industry. The challenge is, when you look at, sort of, that band, 

that the timing of how long it will take them to develop vehicleto-vehicle is measured in, really, decades, not years, and I think we 

need to solve some of these problems now. 

So, I think bringing us together—I think this committee could 

help, I think the FCC could help—but, to sort of bring us together 

to start solving, engineer-to-engineer, some of these basic problems 

so we can make sharing work. 

Senator PRYOR. Mr. Berry, let me ask you. Something that you 

said, sort of midway through your testimony there, you—you were 

talking about spectrum, and you were talking about cellular market areas, which are smaller geographical areas, but I believe what 

you said is, you think, if they went to the cellular market area approach, that actually it might generate more revenue at auction. 

Could you tell the Subcommittee what you mean by that? 

Mr. BERRY. Yes, Mr. Chairman, thank you. 

I—the cellular market areas are smaller slices of spectrum. For 

the smaller carriers, they have to be able to bid and have some expectation of winning. A good example would be, Bluegrass Cellular 

would have—if they sold only EAs—economic areas, which is a 

large area—they would have to bid on markets outside Lexington, 

Kentucky, all the way down to Nashville, Tennessee, in order to get 

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57 

able. Making a small carrier bid on 5 to 6 million pops of megahertz, when they only need 1.4, is another way of putting them out 

of business. 

And I’ll give you a good example. In the 700 megahertz block 

that we were talking about, the C block, which was a REAG, which 

was large nationwide licenses—there was only 12 of those—it 

brought 76 cents per meg per pop. The A block, which was paired 

through EAs—the economic areas—it brought $1.16. But, the 

paired B block, which was in CMAs—cellular market areas, 734 of 

them—brought $2.68. And that’s because the small carriers could 

actually bid and win against the largest carriers in a small area. 

And I think that’s what we have to do if we’re going to have multiple competitors in the 700—600 megahertz spectrum auction. 

Senator PRYOR. Thank you. 

We’ve been joined by Senator Thune, who’s the Ranking Member 

of the full Committee. 

And I’m going to recognize you for an opening statement and 

your questions. 

STATEMENT OF HON. JOHN THUNE, 

U.S. SENATOR FROM SOUTH DAKOTA 

Senator THUNE. Thanks, Mr. Chairman. I want to thank you and 

Senator Wicker for having this hearing, and I do want to just make 

a statement for the record, and then perhaps follow it up with a 

quick question, if I might. 

But, I think we all know, from our daily experiences, how important this issue is to people all across the country, whether it’s a 

farmer in a field checking real-time commodity prices, a college student video-chatting with their family back home, or an executive on 

the road dealing with a crisis back at headquarters. The ability to 

communicate with others and to get online without being tethered 

by a cord is no longer a luxury for many people; it is a necessity. 

Wireless communications have become an essential part of many 

Americans’ day-to-day lives, and I am glad the Subcommittee is exploring the issue today. Without enough spectrum, the private sector will not be able to keep pace with consumer demand, which is 

growing exponentially. We must make it a priority to increase the 

availability of spectrum for commercial use, both licensed and unlicensed, as quickly as possible. 

One important block to open up is the 1755–1780 megahertz 

band of Federal spectrum, because, when paired with the AWS–3 

block, there is a global ecosystem of devices and networks that our 

nation can immediately tap into. 

I have been working with Assistant Secretary of Commerce, 

Larry Strickling, the Department of Defense, and industry officials 

to find a commonsense solution that balances the needs of wireless 

consumers and of the Federal Government. It is my hope that we 

can find a way forward soon that allows the spectrum to be auctioned and cleared in the near future. 

A recently proposed, quote, ‘‘industry roadmap’’ may offer us a 

workable path to achieving that goal. Getting more spectrum into 

the marketplace to the parties that value it most is ultimately the 

best way for Federal policymakers to encourage new services and 

to spur competition. Unfortunately, some voices, including the DeVerDate Nov 24 2008 06:36 Apr 03, 2014 Jkt 075679 PO 00000 Frm 00061 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\87341.TXT JACKIE
58 

partment of Justice, are calling for the Federal Communications 

Commission to micromanage the allocation of spectrum among 

wireless carriers. I stand with Chairman Upton, Chairman Walden, 

and other of our House colleagues who have challenged this perspective in a letter to the FCC, back in April. I believe the Commission should not pick winners or losers among individual companies, 

but, instead, let all interested participants freely compete against 

one another in the open market. 

The FCC began using spectrum auctions because we recognized 

that the free market is more effective at allocating spectrum than 

relying on the opinions and predictions of unelected bureaucrats. 

And with the U.S. being the global leader in 4G LTE connectivity, 

this approach has clearly been very successful. 

The Commission should focus on maximizing participation in the 

upcoming incentive auctions among both broadcasters and potential forward bidders. For example, one way to encourage more bidder activity in rural areas during the auction is to offer licenses in 

a variety of geographic sizes. 

The FCC should not be distracted by proposals that could lead 

to less spectrum being made available and less auction proceeds 

being realized for national priorities, like deficit reduction and 

FirstNet. American consumers, including those farmers, students, 

and executives I mentioned earlier, are driving the mobile economy, and they, not the government, should pick who wins in the 

marketplace. 

And if I might follow that up with a question, I would direct this 

to Dr. Ford. As I mentioned, my ultimate concern is for the welfare 

of the wireless consumers, a concern that I think a lot of my fellow 

members of the Committee share. You state very clearly in your 

opening testimony—and I want to quote—‘‘If incumbent firms are 

precluded from obtaining more spectrum, particularly successful 

firms serving large customer bases, then their quality of service 

will suffer and consumers will suffer,’’ end quote. 

Could you elaborate on how manipulating spectrum auction participation may have unintended consequences? 

Mr. FORD. Sure. Well, there are many ways, but the—what I was 

speaking of there is: spectrum allows firms to provide service more 

cheaply, or more effectively, better quality, or whatever it may be, 

and if you limit firms with—that are demonstrably more efficient 

than others, if you deny them access to that resource and keep 

them from having a lower marginal cost, say, of providing service, 

then you—the consumer doesn’t realize that benefit. If giving 10 

megahertz of spectrum allows a large firm to reduce its marginal 

cost by $2, or a small firm by $1, you’d obviously want to give it 

to the large firm, who could have the larger marginal cost reduction and pass that on to a significantly larger customer base. 

So, it’s always the case, in these theoretical models of spectrum 

caps and spectrum allocation, that you have to think about the efficiency of who is winning the auction, who gets the spectrum. And 

usually, the most efficient firms will win the auction, because of 

that reason. 

Senator THUNE. Mr. Chairman, I thank you. I want to thank the 

panel for their great testimony today, and allow my colleagues on 

this side to ask questions. 

59 

Thank you. 

Senator PRYOR. Thank you. 

Senator Klobuchar. 

STATEMENT OF HON. AMY KLOBUCHAR, 

U.S. SENATOR FROM MINNESOTA 

Senator KLOBUCHAR. Thank you very much, Mr. Chairman. 

I thought this would be a good occasion to announce that one of 

our members has been inducted into the Wireless Hall of Fame this 

fall. That would be Senator Warner. 

Senator PRYOR. All right. 

Senator KLOBUCHAR. I just thought we should announce that—— 

Senator PRYOR. All right. 

Senator KLOBUCHAR.—for his fine work in the business area. 

[Applause.] 

Senator KLOBUCHAR. I’m sure he really appreciates that I 

brought that up. 

[Laughter.] 

Senator KLOBUCHAR. No, anyway, I had some questions. But, as 

you all know, I’ve been very involved in the unlocking issue and 

some of the cell phone bill of rights, for many, many years, here. 

And, despite your sitting at, kind of, the kids’ table at the end, Ms. 

Derakhshani, I was really appreciative of the points that you made 

on behalf of consumers everywhere. And could you talk about how 

this locking of the cell phone and service—you consider it a detriment to competition—how it can hurt consumers? I just see this 

as a great possibility, and I’m—of course, I’m on the bill to fix the 

Library of Congress decision, but I see that more as a Band Aid. 

And Senator Lee and Senator Blumenthal and I have a bill called 

the Wireless Consumer Choice Act, which goes a step farther, to 

ask the FCC to take action to ensure that consumers can unlock 

their oftentimes very expensive phones when they switch carriers. 

Could you talk about that, from a consumer standpoint? 

Ms. DERAKHSHANI. Absolutely. We really appreciate all of the efforts of the members of this committee, and we support the Commerce Committee’s approach to fix the problem through the FCC. 

As you mentioned before, some of these devices are extremely expensive. We feel that, if consumers have to pay for these extremely 

expensive devices, then they should be able to use them in the 

ways that they wish. And that’s really what it comes down to: giving consumers more choice. 

Oftentimes, I believe that the wireless industry touts the diverse 

number of devices and choices available to the consumer, but that 

doesn’t really matter if a consumer isn’t able to make a meaningful 

choice and is not able to do that on the carrier that they wish. 

Senator KLOBUCHAR. And, Mr. Largent, I know that the CTIA argued in favor of the decision by the Library of Congress, even 

though many of your members actually do voluntarily unlock their 

phones for consumers. Can you explain this stance? 

Mr. LARGENT. Well, I was just going to say that there’s a—there 

are over 600 devices that are for sale to consumers today. Many of 

those are sold with—not by carriers. So, they—a person can go buy 

an unlocked phone, today, at Best Buy, and put that on a carrier 

of choice. So, that ability, we support. And even the idea that a 

60 

consumer can unlock their phone that they’ve gotten from an 

AT&T or Verizon or whoever, we support that, as well. 

But, the reason there’s an ETF is because those phones are typically sold for $99, $199, and they’re $700 phones. So, there has to 

be an opportunity for the carrier to recoup the cost that they have 

of the phone. And then, once that cost is recovered, then they will 

freely allow their consumers to unlock their phone. And that’s the 

policy of most of our carriers, if not all our carriers, today. 

Senator KLOBUCHAR. I just know, Mr. Berry, that—and you want 

to respond to this a little bit—in other countries, that they unlock 

phones quicker and allow the service to be decoupled from the 

phone. And do you want to talk about how this could affect rural 

consumers if they are—get stuck with a certain phone and a certain carrier, more likely, and then they move and—I know this, 

from just driving, this week, in rural Minnesota, that certain carriers work in certain areas, and others don’t. 

Mr. BERRY. Yes, Senator, thank you. And thank you for the question. And thank you for all the good work you’ve done on unlocking. 

As you know, I testified in favor of continuing the exemption for 

unlocking phones at the Library of Congress. And I felt that, not 

only was it a good pro-consumer issue to do—to focus on, but many 

of the rural carriers really don’t have access to the iconic phones. 

Getting smartphones and handsets that—state-of-the-art—are very 

difficult for small and rural carriers. And it’s one way of a rural 

carrier distinguishing themselves in the marketplace, and attracting a customer. 

Matter of fact, one of our carriers, T-Mobile, at the time I testified, had over 2 million iPhones on their network, and they didn’t 

sell an iPhone—they didn’t have permission to sell the iPhone. 

So, we think it brings consumer choice, and especially in the— 

a consumer that’s in a urban/suburban area that moves to a rural 

area; they ought to be able to, not only take their iPhone, but all 

the content that is in that, or whatever other phone they may 

have—a Galaxy or Android—and bring it to the network, and utilize it. And we think that that was the right policy decision to 

make. 

Senator KLOBUCHAR. Thank you. 

Ms. Derakhshani, I’ll just end with you, with just—if you want 

to respond to me about—I appreciate your work on cramming and 

bill shock, and also the important issue you raised in your testimony on wireless service transparency. Senator Blumenthal and I 

are working on a bill, which we introduced the last Congress, that 

would require wireless carriers to give consumers more complete 

and accurate information. Do you want to comment either in response to the comments that were made here and then also a little 

bit on transparency? 

Ms. DERAKHSHANI. Sure. With regard to transparency, we really 

feel that it is the duty of carriers to provide consumers with the 

tools that they need to make meaningful choices. All too often, this 

does not happen; and consumers have told us this. 

Senator KLOBUCHAR. Do you want to respond at all to the comments about the expense of the devices and the importance of 

unlocking? 

61 

Ms. DERAKHSHANI. Well, as I mentioned, the Honorable Mr. 

Largent said that—— 

Senator KLOBUCHAR. But, has he been inducted into the Wireless 

Hall of Fame? 

[Laughter.] 

Ms. DERAKHSHANI. I don’t think he—— 

Senator KLOBUCHAR. OK, I just—I just wanted to point that out. 

Ms. DERAKHSHANI. That wasn’t pointed out earlier. 

Senator CANTWELL. I can assure you, he has been inducted into 

a Hall of Fame, and we all appreciate that. 

[Laughter and applause.] 

Senator KLOBUCHAR. All right, if you could, please. 

Ms. DERAKHSHANI. I will just reiterate that time and time again, 

I feel that the wireless industry does tout the fact that there are, 

as Mr. Largent mentioned, 600 different devices out there. But, 

what difference does that make if consumers don’t have a meaningful choice among those devices? So, that’s where I’ll leave it. 

Senator KLOBUCHAR. OK, thank you. 

Ms. DERAKHSHANI. Sure. 

Senator PRYOR. Thank you. 

Our next three Senators will be Senator Heller, Senator Warner, 

and Senator Fischer. 

Senator Heller. 

STATEMENT OF HON. DEAN HELLER, 

U.S. SENATOR FROM NEVADA 

Senator HELLER. Thank you very much, Mr. Chairman. And 

thanks for the opportunity to discuss this issue that I think is critically important for our economy. 

And I want to thank the witnesses for taking time and spending 

some time with us today, and for everybody that’s in the hearing 

who’s expressed and shown their concern for this issue, also. 

I was appreciative of your testimony, Mr. Webster, as you went 

through some of the statistics and the growth that we’re going to 

see in these areas, especially in data traffic and also the mobile devices that we’re going to see by 2017, which, of course, underscores 

the need and the understanding that we need more spectrum, and 

that it’ll all go in the hands of these wireless providers. 

We all know, here, the FCC is working on a complex spectrum 

option right now, and we’re hopeful that we can incentivize enough 

broadcasters to voluntarily sell their spectrum so the Government 

can then auction it for wireless services to the highest bidder. 

Hopefully, that revenue will be enough to cover and accomplish 

several goals. One is—of course, is enough to purchase the spectrum from the broadcasters themselves to fund FirstNet, and, 

hopefully there will be enough left to provide money to reduce the 

deficit. I mean, those are pretty aggressive goals. And, obviously, 

maximizing the revenue in an auction like this is key. 

So, to you, Congressman Largent—and I think all of us have 

kind of touched about the—you know, from the Chairman to the 

Ranking Member, most of us are talking about revenues from this 

auction. And if the Government intervened, as suggested by Mr. 

Berry, to set up rules that limited some in the markets from entry 

to this auction, would that reduce the amount of revenue available? 

62 

Mr. LARGENT. Undoubtedly, it would reduce the amount of revenue that would go to the Treasury. 

Senator HELLER. Are there any reasons, in your opinion, that 

there should be conditions set on the spectrum auction? 

Mr. LARGENT. I, personally, feel like the fewer conditions that 

are set on the auction, the more robust and the more money you’ll 

get from the auction. We have seen, in the 700 megahertz auction 

that was very complicated and just created a lot of hoops for companies to jump through in order to bid on that spectrum, what the 

outcomes were. We’re still wrestling with the 700 megahertz A 

block, that Steve mentioned, because of that. And so, I just think 

that if you just have a clean auction with a lot of spectrum, and 

you let people bid on it, that you’ll have the best outcome, in terms 

of money to the Treasury, funding FirstNet, being able to pay for 

the broadcasters to relocate and compensate them for their spectrum that they give up. 

Senator HELLER. I’m kind of trying to keep an eye on this reverse 

auction portion of this. And if we don’t provide the right incentives 

for broadcasters to sell their spectrum, we’re jeopardizing the whole 

goal of paying—— 

Mr. LARGENT. Absolutely. 

Senator HELLER.—for FirstNet and for bringing more meaningful 

spectrum to the market. In your opinion, is the FCC getting the reverse auction right? 

Mr. LARGENT. I think that’s yet to be seen. I’m hopeful, I’m optimistic. I’ve talked to people at the FCC, and, you know, there has 

been a lot of changes at the FCC over the last month or two, so 

it—that’s a question yet to be answered. But, I am optimistic. I am 

hopeful. They understand the concerns that we have, and I think 

they’re trying to address them. 

At the end of the day, I don’t—I can’t give you an affirmative answer, but I’m hopeful. 

Senator HELLER. Mr. Berry, I’ll give you a chance to respond. 

And, to myself and my constituents, I think it’s important that 

we enjoy a robust, competitive wireless market. I believe that leads 

to innovation. And I also think it lowers the price point for expensive—some of these expensive devices. 

And, in your testimony, you argue for a robust spectrum screen 

that limits the amount of spectrum a company could own, and for 

rules that ensure competitive carriers, that you represent, that 

would be able to bid on this spectrum. Can you give me some idea 

of what those rules would look like? 

Mr. BERRY. Yes, sir, and thank you very much. I would say that 

the 700 megahertz spectrum auction is a—somewhat a good reference. The—well, the fewest dollars amount—fewest amount of 

dollars brought in by that spectrum was the largest sized spectrum. Only the largest carriers could bid on it. And it’s sort of a— 

playing a bluff game. I don’t think that we should do that. 

The Charles River and Associates Study, which was provided last 

year, showed that unrestricted auctions actually can limit the total 

bidder participation and actually reduce auction revenue. As I said 

in my comments, I want AT&T and Verizon in the same ecosystem 

as our carriers, because if they do that, then our carriers were 

going to bid because they know they have an ecosystem that they 

63 

can participate in. They’re not going to get fooled again, like they 

were in the lower 700 megahertz, and ended up not having the ecosystem that they could grow and build and have access to devices. 

If you don’t have—every auction that’s been conducted has had 

some type of rules and restrictions. And I’m really afraid that if 

you have an auction without any recognition that the one or two 

largest carriers should not walk away with the pie, then your auction rules is going to be, essentially, equivalent to, ‘‘Let the big dog 

eat, and let him eat all he wants.’’ And I don’t think that will bring 

in the most revenue to the U.S. 

The 700 auction showed: CMAs brought in almost twice the 

amount of revenue per pop per meg as did the large aggregated, 

REAG areas. And I think we’re going to see that again, and I think 

the FCC should have a device to bring certainty to the marketplace. That’s what—all these carriers want certainty. And if you 

can have certainty on knowing what you’re expected to be able to 

walk away with, you’re going to bid more, and I think the American taxpayer will benefit from it. 

Senator HELLER. Mr. Berry, thank you. And, to all the witnesses, 

thank you very much. 

Thanks, Chairman. 

Senator PRYOR. Thank you. 

Senator Warner. 

STATEMENT OF HON. MARK WARNER, 

U.S. SENATOR FROM VIRGINIA 

Senator WARNER. Thank you, Mr. Chairman. 

Thank you, Senator Klobuchar, for that revelation you made earlier. I—it’s only because I’ve been—I got in the wireless industry 

31 years ago, and I will remind the panel—or, more my colleagues, 

I guess—when it started, 31 years ago, everybody in the industry, 

everybody on Wall Street, thought it would take us 30 years to 

build out a wireless network, and, at the end of that 30 years, 

you’d have 5 percent market penetration. I made a lot of money, 

because they were wrong. 

[Laughter.] 

Senator WARNER. But, one point I would make—and I want to 

kind of play off some of my colleagues’ comments, because, you 

know, a business guy, I want to have the more—most efficient allocation, and, lord knows, we need the revenues. But, I do have to 

tell you, history has showed—and it was a fairly blunt instrument, 

what the FCC did, 31 years ago, in breaking in—the wireless block 

into A band and B band, wireline/non-wireline, and there was lots 

of consolidation. But, I can assure you, particularly in rural communities, there were large incumbent carriers that did not build 

out at—nearly as quickly as some of the startup or smaller companies. And there were a whole host of innovations, in terms of marketing plans, in terms of billing plans and other things, that really 

moved the industry along. If it had just been left to the Bell guys, 

the old Bell companies, I’m not sure—those original projections 

might have been—might have been correct. 

I also make the appeal to my colleagues—and I’m going to get 

to a question in a moment, but I want to take this moment with 

folks here—that, you know, if there’s one common theme as we— 

64 

we need a lot more spectrum. And I think Mr. Ford made a comment that some folks in government say, you know, ‘‘I would not 

agree with the President’s’’—and everybody who’s saying that, 

‘‘Never should we allow any government spectrum to be commercially used.’’ I mean, one of the things we have tried—with, actually, Senator Snowe and I, for some time—just to get a spectrum 

inventory. And I would urge any of my colleagues who want to join 

me in this—again, we don’t even know—because the Government 

has a disproportionate amount of spectrum—how it’s being used, 

and how efficiently it’s being used. I mean, we’ve gone off and done 

things like public safety allocations of additional spectrum, without 

any take-back opportunities from spectrum that may not be fully 

utilized to its best effect. And, you know, we need at least a roadmap of where the spectrum is. And that gets us into areas with 

DOD and Intel and others, but a host of other public functions 

that, if we’re going to reinforce—whether it’s public safety or others—having some skin in the game, in terms of some of their spectrum, would be, I believe, a criterion. 

I guess—I want to go to—Steve, to you, to put—I know where, 

kind of, everybody else falls down. I’m trying to put you a little 

more in the box, here, because I do think one potential way to try 

to maximize revenues, but also maximize players without some 

undue restriction, because we’ve got the big two, but then we’ve got 

the next two, and then we’ve got a lot of small players. How do we 

not just make it—if you exclude the top two, something that just 

defaults to, you know, T-Mobile and Sprint? But it—has CTIA 

taken a position on the EAs versus the CMAs? 

The one thing about the CMA, as Mr. Berry has made comment, 

is that smaller carriers who are targeted in a market that might 

be able to provide better customer service, better quality service, 

and quicker delivery of that service than an incumbent that might 

otherwise warehouse the spectrum, might be a way to—you know, 

to kind of get at this. 

And then, I would be interested to hear Mr. Ford and Ms. 

Derakhshani’s comments on this, in terms of—— 

Mr. LARGENT. Well, I would say, Senator, that—first of all, congratulations on your award. Second of all—— 

Senator WARNER. Not as cool as yours, and I don’t get it 

until—— 

Mr. LARGENT. Yes. 

Senator WARNER.—the fall. 

[Laughter.] 

Mr. LARGENT. But, second of all, I think that what you’re talking 

about is—number one, we don’t get involved in the size of the licenses, because we have a lot of Mr. Berry’s members as our members, we have the big carriers as members. So, we don’t get involved in that debate. But, I would tell you that the more spectrum 

that you bring to the market, the fewer debates, like we’re having 

today, will exist, because everybody’s going to get a chance to supplement their spectrum holdings. And that’s what’s—that’s what 

we have always pushed, is, get as much spectrum as possible to the 

market as soon as you can, and then a lot of these debates that 

we have between Steve and myself or our carriers have among one 

another, those go away, because—— 

65 

Senator WARNER. And should there be any distinction between 

that spectrum below 1 gigahertz and that spectrum above? 

Mr. LARGENT. Yes. I—and I think—I would draw the line at 3 

gigahertz and below. That’s the spectrum we’re particularly targeting for auction for wireless carriers. 

Now, we support the other folks that want to have Wi-Fi and 

other services. We support that. But, in particular, the spectrum 

that’s below 3 gigahertz, that’s what we’re really looking at for 

wireless—— 

Senator WARNER. I’m going to—my time’s run out, I won’t ask 

the others. I’d only make one other comment, to my colleagues. 

I know this debate about unlocking phones is important, but if 

you don’t have interoperability, it doesn’t matter if you unlock, because if you—that phone can’t be used across systems. And one of 

the things that I hope we can get more growing consensus on is 

not lose track of the fact that—we would not have a wireless system in America, but for the requirement the FCC made, 35 years 

ago now, on interoperability. 

Mr. Chairman. 

Senator PRYOR. Thank you. 

Senator Fischer. 

STATEMENT OF HON. DEB FISCHER, 

U.S. SENATOR FROM NEBRASKA 

Senator FISCHER. Thank you, Mr. Chairman. 

We seem to be having a focus, here, in our conversation on how 

the Government’s going to get the most revenue out of this spectrum auction. And I guess I would open this up to Mr. Webster and 

Dr. Ford. And I’m interested in your opinion, as well. But, first, I’d 

like to inject this into the conversation: 

Do you think that wireless service is a right of every citizen of 

this country? If you do, do you believe that smaller companies that 

service people in areas that have difficulty in receiving service or 

receiving timely upgrades—should the Government somehow recognize that right, if it exists, and how should it be addressed? 

So, I would ask Mr. Webster, first, and then Dr. Ford. 

Mr. WEBSTER. Senator, at Cisco, we believe broadband is a great 

enabler for societies, for education, for business, for productivity of 

the economy, for telemedicine, for public safety, for, simply, better 

quality of life and all that can be done that can help foster even 

greater broadband penetration. Higher quality broadband and faster broadband is something that should very much be pursued. 

Mr. FORD. Well, I think if you want to maximize the auction revenue, you need to sell one license. Monopolies will pay the most. 

So, that’s really not what we’re trying to do, I don’t think. We use 

that. We’re—I mean, I think Senator Warner mentioned ‘‘maximize 

revenues and maximize the number of people that get it.’’ It is this 

playoff between the two. 

As far as the rural markets, I think it’s—it’s interesting to think 

about that problem. And I don’t know if I have a specific answer 

for you, but I have been thinking about that as this interoperability 

issue and roaming issue comes up. 

If you take roaming, for example, the argument for roaming is, 

you need—we have to force these larger carriers, that are everyVerDate Nov 24 2008 06:36 Apr 03, 2014 Jkt 075679 PO 00000 Frm 00069 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\87341.TXT JACKIE
66 

where—nationwide networks—to permit—smaller companies don’t 

have nationwide networks—to use their networks, because, if they 

don’t, there’s no demand for the service, which is essentially saying 

there’s no demand for local mobile wireless service. It’s a national 

market. 

So, to some extent is—if we keep forcing—imposing these rules, 

we are creating entities that really don’t fit into what the market 

really may be. OK? So, that’s an interesting problem. 

It’s sort of that way with interoperability, as well. If being—having a certain market share or operating in certain places is what 

drives the equipment market—if you’re not in that space or you’re 

not big enough, then are you the right type of firm to serve this 

market? Can you serve the market efficiently? 

And I guess, as someone who was—worked for a unbundled element, CLEC, I’m a little bit worried about business plans that 

hinge on government promises and rules rather than the underlying fundamental economics of the business. And I think we’re 

getting into that area a little bit. But, I can understand why people 

would say, ‘‘Well, they’re not going to get served,’’ or something like 

that. But, I think that’s sort of a secondary market problem. If the 

larger carriers don’t want to serve the rural markets, then why 

wouldn’t they allow someone else to use their spectrum? And I 

think there are some—we need to study, carefully, what it is about 

the secondary market that is keeping firms out of it to address 

many of these problems. 

Senator FISCHER. Mr. Berry, do you think some of those ideas 

that we just heard from Dr. Ford are going to help with access, 

then, to rural areas? Or do you have other suggestions on how we 

can improve that access? 

Mr. BERRY. Yes, I—I don’t agree with much of anything of what 

Mr. Ford just said. If you’re in rural America and you want access 

to wireless, I think—whether you consider it a right or not, I think 

there are competitors out there that would like to provide it. And 

what we’ve seen is, the smaller carriers are willing to build out 

that most difficult-to-reach, most costly buildout, and service those 

few customers, because that’s their business model. The larger carriers, it’s barely a decimal on their profit sheets. And it would be 

the last place that they would build out, unless there were buildout 

requirements. 

In Germany, you know, they actually did a reverse buildout. You 

had to build out the rural areas first. Of course, Germany, there’s 

not a whole lot of rural areas, compared to the United States. But, 

there are countries in the world that have addressed that. Canada 

has addressed it in their latest 700 megahertz. Build out to rural 

areas first, before you get to the metropolitan areas. 

I don’t know that’s what we would do, but there are ways, with 

government suggestions, that you can ensure that every consumer 

has access to broadband. 

And we did a study, a year or so—a year and half ago, that 

showed that, in rural America alone, out of the 14 states—19 

states—that had less than 90 percent penetration, if you were to 

build out mobile high-speed broadband, you would actually increase 

the median income of every family in that state by as much as 5 

percent. Now, that’s the type of growth in rural America we’d like 

67 

to see, and that’s the type of job promotion—over 100-and-some— 

110,000 jobs created, just in rural America—with the mobile 

broadband buildout. Those are the types of economies of scale that 

may not show up in a flat economic study about what we should 

or shouldn’t do. 

Senator FISCHER. Thank you. 

Mr. LARGENT. Senator, could I add just one thing to that? 

Senator FISCHER. My time’s up. If—— 

Mr. LARGENT. Well, I was just going to say—today, LTE is the 

4G technology that wireless is providing, and today, 90 percent of 

people in this country are covered by that LTE network. Today. So, 

we’re talking about another 10 percent. And this is technology 

that’s just been around for, you know, less than 18 months. So, 

we’re rapidly covering the country. It’s the 10 percent that we’re 

talking about now that I think will be covered in the near term. 

Senator FISCHER. Thank you. 

Thank you, Mr. Chairman. 

Senator PRYOR. Thank you. 

So, our next two Senators would be Senator Johnson and Senator 

Nelson. 

Senator Johnson. 

STATEMENT OF HON. RON JOHNSON, 

U.S. SENATOR FROM WISCONSIN 

Senator JOHNSON. Thank you, Mr. Chairman. 

I love it when people agree on things. And it looks like we’re all 

agreeing on: we need more spectrum. So, kind of going down the 

line—anybody that wants to chime in, starting with Congressman 

Largent—what is the greatest roadblock? What’s the number one 

stumbling block to creating more spectrum? 

Mr. LARGENT. Well, I’d answer—two things. One is on the auction that’s immediately scheduled to occur in 2014. One, we have 

to keep it on schedule. And that’s going to be a challenge, with the 

vacancies at the FCC today. Second, the additional spectrum that 

we need, beyond broadcaster spectrum, it—well, even with it— 

going back to the broadcaster spectrum, it’s—there’s no way to assure how much spectrum is going to be available, because they may 

not buy into it. 

Now, we’re working—our companies are working with the broadcasters, trying to erase as many difficulties as we possibly can to 

try to free up 120 megahertz of spectrum, if we can. I don’t know 

if that’s going to be possible. You know, put that one on hold, and 

watch and see. 

In addition to that, though, we’re going to need—if we get to the 

500 megahertz of spectrum that was called for in the National 

Broadband Plan, then we have a lot of work left to do, and the Government is not always willing to part with the spectrum that they 

have. 

Of all the usable spectrum that there is, the Government owns 

70 percent of it. So, 30 percent, we have—or, Wi-Fi has, or somebody else has, other than the Government; 70 percent, they have. 

So, we have to find a mechanism to coerce the Government to give 

up some of their spectrum. And that’s hard to do, because they’re 

sitting on spectrum that, you know, they were given, and there’s 

68 

no reason that they have to give it up, because they don’t get 

the—— 

Senator JOHNSON. But, don’t—— 

Mr. LARGENT.—they don’t get the auction proceeds—now. We 

think they should. But, they don’t get the auction proceeds, so why 

voluntarily give up spectrum that you have? So, that’s going to be 

an issue for us, going forward. 

Senator JOHNSON. So, the short answer is: government. 

Mr. LARGENT. The Government has a lot of spectrum. We need 

to try to figure out a way to free it up. 

Senator JOHNSON. Yes. And government’s not that easy to coerce. 

[Laughter.] 

Senator JOHNSON. Mr. Berry. 

Mr. BERRY. I agree with Steve, that there are two areas to look 

at. You know, you go where the vast majority of it is. And one is, 

government owns exceedingly amounts—large amount of spectrum. 

And they do need to be much more efficient, and we do need to find 

a way that we can move them out, where they’re compensated. 

And, actually, when you think about it, we get—they get new devices, they get new technology. LTE networks are five times more 

efficient than the 3G networks that are out there now. If government thought that way, they might say, ‘‘Well, maybe I could get 

five times more efficiency out of spectrum—less spectrum.’’ 

And the other is the broadcasters. You know, 120 megahertz 

would be nice. I mean, you’ve got to ask yourselves—the broadcasters, for all the good they have done, 90 percent of the American 

people listen to their broadcasts over some other wireline capability, either a dish, a satellite, or cable. And 10 percent—8 percent 

of the American people listen to it over the air. What is the economic justification for those two imbalances? When $166 billion is 

estimated, of new growth in the economy if we added 500 megahertz of spectrum, I think we know where we have to go get it. 

Senator JOHNSON. OK. 

Mr. BERRY. It’s a tough decision. 

Senator JOHNSON. Mr. Webster? 

Mr. WEBSTER. Senator, in addition to the comments from the 

previous two witnesses, I think there is a burden—or a hurdle will 

be a lack of urgency. This is not necessarily a problem that is just 

going to be coming in the future; it is starting to get to be immediate issue now, and is going to require action to get as much spectrum as quickly as possible out into the marketplace. 

The second issue, especially in terms of the voluntary incentive 

auction, is going to be—the education needs to be driven by the 

FCC to the broadcasters, themselves, especially in the major metropolitan areas, where they have the biggest—the biggest need for 

the spectrum. We can’t necessarily expert a broadcaster to understand all the nuances of the telecommunication world, and that’s 

a big area that the FCC could strongly contribute in to help make 

that auction a success. 

Senator JOHNSON. OK. 

Mr. Nagel. 

Mr. NAGEL. I think one of the things is, sort of, the concept of 

incumbency in some of these spectrum bands. If you look at—look 

at the 5, you know, gigahertz band, which is probably the most 

69 

promising, from the standpoint of making large channels to drive 

really, really fast Wi-Fi. It’s the idea that, sort of, ‘‘I own it.’’ And 

I think that what we—what we need to do is sort of have a new 

view, which is spectrum sharing. You know, there are people in almost all spectrum now. And so, we have to really develop this concept of, how do we share amongst ourselves, develop the rules so 

that things like Wi-Fi, which is a secondary service, work with, sort 

of, licensed and other incumbents? 

Senator JOHNSON. Mr. Ford. 

Mr. FORD. Entitlement to what you have licensed, which is what 

everybody said. I’ve been thinking about the Government issue a 

lot lately, and I think the problem is, we have a command-and-control management of spectrum in this country, and we need to inject 

the market, not in fiddling with the incentives of the Government, 

but inject the market into the management of spectrum, itself. Because these problems—when you can start moving money around, 

people get interested in talking to you. But, now we’ve got to deal 

with the FCC and the NTIA and maybe Congress, and try to get 

all these things done, and it’s just—and mainly so—I mean, I don’t 

know if the broadcasters are taking money from the Government 

in the spectrum auction, or the Government is taking money from 

the broadcasters in the spectrum auction, but if you can get the 

market involved in the management of spectrum, then I think it’ll 

move a lot quicker than it is. 

Senator JOHNSON. Ms. Derakhshani, I know I’m over time, but 

I hate to not give you the opportunity. 

Ms. DERAKHSHANI. Very quickly? Great, thank you. 

So, we would say, beyond the problem, freeing up spectrum and 

getting it to market, it also must be built upon quickly. Consumers 

won’t be able to benefit from this additional spectrum unless it’s 

built out upon. And, for that reason, I would say that we disagree 

with Dr. Ford’s analysis that consumers will benefit from spectrum 

going to the largest carriers. Economic theory, as useful as it may 

be, doesn’t necessarily serve as a proper metric for consumer welfare. 

Senator JOHNSON. Thank you. 

Well, Mr. Chairman, I think, to—just to summarize, it’s going to 

require urgency from the Federal Government, and I certainly appreciate your holding this hearing, because we’ve got to create that 

sense of urgency, that type of leadership. 

Thank you. 

Senator PRYOR. Thank you. 

Senator Nelson. 

STATEMENT OF HON. BILL NELSON, 

U.S. SENATOR FROM FLORIDA 

Senator NELSON. Well, what happens if we don’t release a lot of 

spectrum? So, Mr. Largent, what I’d like to ask is, To what degree 

can you make equipment and systems more effective if that were 

the scenario to play out? 

Mr. LARGENT. Yes. Well, I would rely on the experts on that. And 

so, I’d look to a company like Qualcomm, which builds efficiency 

into wireless networks. And their CEO said, at our show, not this 

year but last year, that we are fast approaching the time where 

70 

we’ve gotten all of the efficiency out of the market that’s available, 

that they don’t have any new tricks up their sleeve to develop more 

efficient systems to take advantage of the spectrum that we have 

today—that we’re going to have to have more spectrum, is the bottom line. 

And what are the results if we don’t get more spectrum? I can 

tell you that it—what you will see happen—my guess—I’ve never 

been told this, but my guess is, you’ll see higher prices, because 

when—that’s how a carrier or a manufacturer deals with inefficiency in the marketplace and a lack of new materials or new spectrum, is by raising the prices. So, that’s the only way that you can 

monitor or control the usage that’s on your system that you have 

today. And that’s not—that’s not the world that we want to see. 

Senator NELSON. The way Congress is operating is not the world 

that I want to see, either. And yet, we find that it often doesn’t 

work. 

Anybody else want to comment on that? 

Mr. FORD. Higher prices and lower quality, that’s what’ll happen. 

And you’ll find innovative new business plans. Comcast building 

out its Wi-Fi network—people will start using that kind of model, 

but it won’t be, really, what people want; it’ll be an imitation of 

what people want. 

Senator NELSON. Mr. Webster? 

Mr. WEBSTER. Yes. Just to use my Beltway analogy, Senator, 

from opening comments, if there’s nine times more traffic on the 

Beltway in 5 years, there’s going to be a great loss of productivity, 

a great loss of quality of life. It would affect the economy and actually make for a thoroughly unpleasant experience for us all. 

I think the way to solve this, no question, is going to get more 

licensed spectrum available, more unlicensed spectrum. There is a 

requirement, on technology innovation, to continue to improve the 

efficiencies, as we’ve seen with the difference between 3G and 4G. 

And there also is going to be a need to have network management 

that is appropriate to actually direct the proper supply to the demand when it’s actually going to be necessary to optimize the experience for all. It’s a combination of all four of those. It’s not an either/or but a both/and scenario. 

Senator NELSON. So, Cisco can do all of it to make it a lot more 

efficient. 

Mr. WEBSTER. Senator, I wish I could tell you that were the case. 

But, we definitely can advance on the technology innovation, and 

we can be ardent advocates to help promote national broadband for 

the betterment of this country and all others around the world. 

Senator PRYOR. Thank you, Senator Nelson. 

Mr. Berry, did you have a comment on that last comment? 

Mr. BERRY. Oh, I was just going to—thank you—I was just going 

to say that we are going to have to get better on the technological 

side. I’d say 90 percent of our capacity has been through technological innovation, not increasing spectrum. And—over the last 20 

years—we are getting to that point, that there has to be significant 

breakthroughs. And whether it’s software-defined antennas and 

radio—frequency skipping radios, we’re always looking. But, 

they’re 5 or 10 years away, and we’re on an immediate head-on collision. 

71 

There’s other things that we can do right now to—especially in 

some areas—to enhance and—the efficiencies of the spectrum that’s 

currently there. I know that, last year, Senator Klobuchar and Senator Snowe introduced the legislation that would actually put some 

real flexibility in utilizing unused spectrum in those rural and regional markets. And hopefully, we’ll start looking at innovative 

ways to do that. It won’t stave off the draconian impact, but it will 

allow us to survive a few more years. 

Thank you. 

Senator PRYOR. Mr. Webster, let me ask you a quick question— 

I see that we’re being joined by another colleague, here, but let me 

ask you a quick question about spectrum. 

We’ve all talked about how we need more spectrum, but is it fair 

to say that not every area of the country needs more spectrum, 

that, for a lot of areas of the country, it’s just really an infrastructure limitation more than, truly, a spectrum limitation? Although 

there are clearly some urban areas and congested, kind of, metropolitan areas that definitely need more spectrum. Is that fair to 

say? 

Mr. WEBSTER. In our experience, every major operator in the developed world is in need of spectrum, one way or another. Certain 

developing nations don’t necessarily feel the pinch, but, very much 

in the United States, there are going to be requirements of both licensed and unlicensed. We are seeing—to your point, Senator— 

definite need in the very dense metropolitan areas, right now, 

where there’s just a very high concentration of people and devices 

looking to take advantage of the benefits of that. That’s why any 

and all spectrum that can be made available for use would be helpful. 

Senator PRYOR. And let me just follow up on that, if I could. And 

that is, are there ways that we could offload the need for spectrum 

with some of our wireless devices? For example—I’ll just give you 

a couple—where a wireless device could pick up, just, over-the-air 

broadcast television and radio. Does that move the needle much, in 

terms of the need for spectrum? 

Mr. WEBSTER. Sir, in terms of the overall demand of offload, you 

very much are accurate, in that there is going to be a need to offload from the more tightly constrained licensed radio spectrum, or 

cellular radio, off to the unlicensed radio spectrum, largely through 

Wi-Fi. And the key is going to have—to be those two technologies 

working together as seamlessly as possible to have a very smooth 

mobile experience. In terms of broadcasting over the air, that is one 

option to consider; however, the vast majority of demand now is ondemand, where broadcasting to many doesn’t necessarily work. 

Senator PRYOR. I see. 

Senator Rubio. 

STATEMENT OF HON. MARCO RUBIO, 

U.S. SENATOR FROM FLORIDA 

Senator RUBIO. Thank you. 

My first question—either Dr. Ford or Mr. Largent could help answer this—is about secondary spectrum markets. And considering 

the growing spectrum demand that we have, and the amount of 

time it takes to get spectrum from auction or clearing it to the marVerDate Nov 24 2008 06:36 Apr 03, 2014 Jkt 075679 PO 00000 Frm 00075 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\87341.TXT JACKIE
72 

ketplace, secondary market transactions become that much more 

important and necessary in order for carriers to acquire spectrum. 

So, should FCC approval of these transactions be streamlined, particularly for smaller transactions? Do you have any thoughts on 

how we should do that? 

Mr. FORD. Well, I recently wrote a paper on that, at least certain 

aspects of it. I think, certainly, if you’ve got a capacity problem, a 

spectrum problem, and somebody has some that they don’t need, 

and somebody does, you make a transfer. But, always, these transfers get bound up in the politics of the deal, and people see opportunities to, you know, impose voluntary conditions and things of 

that nature. I think a lot of the smaller deals do go through. It’s 

when you start getting—as we’ve been talking about here today, 

when you start getting AT&T and Verizon involved, then you run 

into problems, where people are saying there’s too much spectrum 

concentration. 

But—the FCC has been a little slow, but they’ve actually approved deals recently without too many conditions on them, so 

there’s some help there. But, there are many—that secondary market issue needs to be figured out and resolved, and I’m—I don’t 

know all the problems with it, but it’s not working as well as it 

should. 

Mr. BERRY. You raised the issue of the secondary market. The 

secondary market is not actually working for the smaller carriers 

right now, because they’re always being outbid by the largest carriers, because spectrum is at a premium need. And if you look, in 

the last 2 years, there were a little less than 1,200 license transfers, 800 license transfers went to AT&T and Verizon. In the last 

year, 300 license transfers went to AT&T and Verizon with under 

1 gig in the spectrum. What we haven’t talked about here today is 

the efficiency of the spectrum itself, and how much more efficient 

certain sizes—certain spectrum and propagation values are over a 

higher gigahertz spectrum. 

So, that the secondary market hasn’t worked, I’d like to see ways 

to enhance it. And I think Senator Klobuchar’s bill, last year, 

would help open up some of those secondary markets for the smaller carriers. It’s something I think we should still be exploring. 

Senator RUBIO. My second question—and again, anyone can help 

answer this; I think I know the answer, but I want to make sure— 

is that I know the industry is really focused on the 25 megahertz 

from 1755 to 1780, but do we have a cost estimate for clearing Federal users from that 25 megahertz? And if we don’t, I guess the 

question is, why not? And doesn’t that really hurt the chances of 

clearing it? 

Mr. LARGENT. The industry’s actually done a study on that, and 

they’ve used government figures to come up with this result. But, 

the result was, it was going to cost about $4.6 billion to move the 

Federal users. 

Mr. BERRY. I should note that—Steve is exactly correct, but if 

you pair that with the 2155 to 2180, the entire value of those two 

pairings—and you have to sell 2155 to 2180 by 2015, according to 

the direction of Congress—the value of those two paired spectrum 

would be $12 billion. So, there’s an opportunity, here, for us to act, 

and act now, and I totally agree with Steve on that. 

73 

Senator RUBIO. OK. And my last question is based off the testimony of Mr. Webster. You stated—this is a quote—that ‘‘Mobility 

has the potential to generate hundreds of thousands of more jobs 

if the Federal Government acts promptly to ensure that additional 

spectrum is made available to fuel future mobile broadband 

growth,’’ end quote. 

My question is, what happens if we don’t? What happens if we 

don’t act promptly in that regard? What are the implications for 

our economy? Maybe the FCC and the NTIA don’t work together 

to make more spectrum available. 

Mr. WEBSTER. Senator, I believe the implications are that we’re 

going to stall a very growing, thriving sector of our economy. We’re 

going to be minimizing productivity gains of all different users, and 

impeding communications in our economy. And, frankly, it will 

start to put us behind on the global landscape. If we can’t have 

strong mobile broadband, there are going to be a number of sectors 

that will—very well may choose to reside elsewhere. They will go 

someplace where they can actually get the bandwidth they need to 

operate their global businesses. 

Senator RUBIO. Thank you. 

Senator PRYOR. Thank you. 

Senator Blumenthal. 

STATEMENT OF HON. RICHARD BLUMENTHAL, 

U.S. SENATOR FROM CONNECTICUT 

Senator BLUMENTHAL. Thank you, Mr. Chairman. 

Thank you all for being here today. And I have a couple of questions. I hope I won’t cover ground that has been covered already, 

from what I’ve followed. 

Let me sort of pick up on a point that Mr. Berry was making 

about the differences in spectrum—not all spectrum is created 

equal, so to speak. And the Department of Justice recently wrote 

to the FCC, as you know, to ask that the FCC weigh in on exactly 

this issue, on how the Commission can structure its spectrum policy to encourage competition and promote consumer benefits. And 

the DOJ noted that, just like in real estate, some spectrum is the 

equivalent of beachfront policy; and others, less desirable. 

So, since the beachfront property, so to speak, is already heavily 

concentrated—I think 78 percent of the spectrum below 1 gigahertz 

belongs to—or, is controlled by AT&T and Verizon. Let me ask both 

Mr. Berry and Mr. Largent, what can be done to put more sensible 

limits on spectrum consolidation before reviewing mergers? Do you 

think that there ought to be limits, in reviewing mergers or conducting auctions? On approving other spectrum license transfers, 

should the FCC account for the differences in the quality of spectrum, particularly in low- and high-frequency spectrum, in making 

those kinds of judgments? 

Mr. LARGENT. Well—yes, I—Senator, the ideal situation for a 

carrier is to have both high-band and low-band spectrum. One is 

better for when you’re dealing with concentrated users, and the 

other—and another type of spectrum is better to cover broad areas 

in rural communities. So, ideally, carriers want to have spectrum 

both below 1 gigahertz and above 1 gigahertz. So, that’s ideally. 

74 

But, I would say we have carriers on both sides of this, and so 

it’s kind of—it’s an issue that we don’t deal with at CTIA, because 

there’s not a unified position within the industry about the direction that we should go. 

Senator BLUMENTHAL. Mr. Berry? 

Mr. BERRY. Senator, I’d—I have a chart here that you might 

want to look at, if you can get a clerk to provide you. It’s actually 

a coverage comparison on the value of spectrum. And the—and 

courtesy goes to Verizon for putting this together. I think they did 

this for one of their stockholder meetings. 

But, it shows that there is a significant difference in the value 

of low-band spectrum and high-band spectrum. Matter of fact, the 

build is four to five times as many towers to cover the same 

amount of spectrum if you have high-band versus low-band. 

And this 600 megahertz spectrum that’s coming available is absolutely prime real estate. And that’s why I think that the FCC 

should do two things. One, they should finish the spectrum aggregation proceeding that they currently have, and identify what is a 

spectrum amount that is acceptable in every market. And then 

they should put a trigger—a double trigger in there that says, ‘‘If 

you’re in a market where you’re exceeding or about to exceed the 

spectrum trigger, then you ought to be able to justify whether or 

not you need the spectrum, or not.’’ I think that those two things 

put in place for the auction would probably end up limiting certain 

markets that AT&T and Verizon could accumulate over a certain 

amount of spectrum—and that would go a long way to making sure 

that smaller- and intermediate-sized regional carriers could actually buy the spectrum that they need to continue to be competitive. 

Senator BLUMENTHAL. So, you think there should be some kind 

of sensible limits or controls or—— 

Mr. BERRY. I think it’ll bring certainty to the market, and I— 

hopefully it will keep AT&T and Verizon bidding in the market, 

and hopefully we’ll have an ecosystem that everybody can participate in. So, yes, I do believe there should be some type of gating 

mechanism so that one carrier cannot walk away with the pie. 

Senator BLUMENTHAL. Let me shift to text messaging. Maybe you 

can explain, Mr. Largent, why there is a discrepancy between the 

low cost of transmitting text messages for the mobile carrier and 

text-messaging rates, which seem to be increasing. 

Mr. LARGENT. Well, I can tell you that I, personally—my rates 

aren’t increasing. And it’s not because I’m the head of CTIA. My 

wife’s rates aren’t increasing, either, because we have an all-youcan-eat plan. And the majority of Americans have a plan similar 

to that, where they pay one fee. I think it’s—— 

Senator BLUMENTHAL. Well, my understanding is that, actually, 

most consumers, or many of them, are paying more for text messaging. Over the past several years, carriers have been offering 

fewer options in text-messaging plans, and at higher rates. Most 

carriers now compel consumers to choose between a $20-a-month 

unlimited text-messaging plan or a per-message rate of 20 cents. 

So, the options are fewer. You may have chosen one where the cost, 

incrementally, does not rise. But, for other consumers, text-messaging costs are increasing. And the point is that the costs for the 

carrier are not increasing. 

75 

Mr. LARGENT. Well, what I would say is, the great thing about 

this innovative industry, there are always ways that you can get 

around that, as well. There’s many applications you can download 

on your phone, where there’s no cost to text message. So, I just 

think, in this really creative, competitive, innovative industry, 

there are ways to work around these different issues that consumers have. And, frankly, that’s why this industry, to me, is so 

exciting and fun to be a part of. 

Senator BLUMENTHAL. Well, you should talk to some parents. 

You’ve talked to your wife. You should talk to parents—I don’t 

know whether you have children—who have to pay their children’s 

cell phone bill. And that per-message rate, if that’s the one that 

they choose, can add up pretty quickly. And the point, here, is that 

maybe there should be lower-cost options for that per-message rate. 

Mr. LARGENT. Right. And that’s what I’m saying. There are 

lower-cost options that are available. So, it’s just a matter of the 

consumer finding those out. And it’s not like they’re hidden. If they 

look for them, they’ll find them. 

Senator BLUMENTHAL. My time is expired, but I do appreciate 

your being here. Thank you very much. 

Senator PRYOR. Thank you. 

Senator Klobuchar. Thank you for your—— 

Senator KLOBUCHAR. Thank you. I just want to follow up—no 

questions, but I’m one of those mothers that didn’t want to get the 

unlimited texting, because I didn’t want my daughter to unlimited 

text. And I know what those higher bills are like. So, thank you. 

And I still haven’t changed. And I hope that you’ll change. 

The questions I had was on spectrum. And we’ve talked a lot 

today about how there’s just this growing demand for spectrum. We 

all know that. And with this increased discussion about relocating 

government spectrum users in order to increase spectrum available 

for commercial—for consumer broadband usage, I know that Commissioner Rosenworcel has suggested providing financial incentives 

to government agencies to participate in relocation. And, as I understand it, she has proposed allowing agencies to reclaim a portion of the revenue that would come from auctioning off their spectrum, and this would be used to relieve the significant budget pressures facing all Federal agencies. 

Could you explain, Congressman, if you envision such a proposal 

could work? 

Mr. LARGENT. I think it absolutely can work, and I support that. 

And I’ve relayed those comments to the Commissioner about that. 

I think it’s a great idea. 

Senator KLOBUCHAR. OK. 

Anyone else want to comment? 

Mr. BERRY. Yes. Actually, we did that in 2001/2002, when we 

cleared 1710 to 1745. I was at CTIA at the time, and we passed 

legislation that authorized the DOD to actually get reimbursed for 

the cost of their new capabilities, moving to a different slice of 

spectrum. And I agree with Steve—Mr. Largent—that it will be 

helpful, and we ought to try it, because we need to get more spectrum out of the Federal Government, for sure. 

Senator KLOBUCHAR. OK. 

Anyone else? 

76 

[No response.] 

Senator KLOBUCHAR. OK. I am the Chair of the NextGen 911 

Caucus, and we’re always looking for ways to improve public safety. Clearly, interoperability in the whole spectrum issue will be 

helpful. And we’ve got, in our state, about 27 percent of the Minnesotans living in rural areas, but almost 70 percent of our motor 

vehicle accidents occur in rural areas. And we know there are a 

number of reasons for this disturbing fact. But, could you speak a 

little bit about the public safety implications of widespread access 

to wireless networks, especially in terms of decreasing response 

time? And could you discuss, maybe—either of you, at the end 

there—how your members are working with the FCC on the implementation of text-to-911 services, which—we know a lot of people 

are now using text to communicate with 911. 

Mr. LARGENT. Sure. We’re actively working with the FCC to participate in the 911 panel that they have, the Committee. And, you 

know, my hope is, is that we can expedite this process. We have 

done a lot of work. And, frankly, though, a lot of work still needs 

to be done, on the Government side of the equation, to get them 

caught up, in terms of the equipment that they have and the ability to receive information from wireless carriers, that they can’t 

now. So, that really is one of the most inhibiting factors in delivering next-generation 911 service, is their ability to receive the information at those centers that you’re referring to. 

Senator KLOBUCHAR. Do you want to add anything, Mr. Berry? 

Mr. BERRY. Yes. We, too, are working with FCC. And actually, 

have—are complying with the text—the bounce-back for the text 

911 bounce-back. And the smaller carriers, may take them a little 

longer. And I think we’re working with FCC to actually be able to 

meet the NG–911 requirements. But, it’s—absolutely right, with 

that capability comes a responsibility. And our carriers, I think, are 

stepping up to the plate. 

But, Steve is absolutely right, it would be nice to have PSAPs, 

and the public service—or public answering systems—compliant, 

also. 

Senator KLOBUCHAR. Very good. 

You raised, Ms. Derakhshani, about the issue of cramming, earlier in your testimony. And I know there are intricacies to the wireless industry. But, at the same time, I’ve seen consumers show me 

their bills in Minnesota, not just on the—on regular phones, but 

also on the wireless. And I know the FCC’s looking into this. And 

how underreported do you think it is? I just know—we had a Lutheran minister who went through his bill every single day, and 

then found it. And I just don’t think everyone’s doing that and 

looking at their bills that carefully. 

Ms. DERAKHSHANI. Absolutely. We think this is a very important 

issue. We’ve been alerting our readers to the practice of cramming, 

and telling them to carefully look at their bills every single month. 

But the fact is that when consumers do not anticipate these 

charges—when consumers do not initiate the requests to have 

these charges, they’re not looking for them. This further contributes to the problem. 

Industry often points to the fact that these numbers—the complaint numbers simply aren’t there. But, the fact of the matter is, 

77 

these numbers are underreported because many consumers have no 

idea that this practice is taking place. 

Senator KLOBUCHAR. OK. 

I’ll put my last question on the record—I see Senator Ayotte’s 

here—but, to you, Mr. Berry, and it’s just about the interoperability issue. 

I thought it was good, Senator Warner raised that. It is true that 

we need the interoperability to do the unlocking. And my question 

was going to be focused on the rollout of 4G service and the problems with that, in rural areas, if we don’t have interoperability. 

So—— 

Mr. BERRY. Well, especially in the lower 700 megahertz band. 

Without interoperability, it’s going to be a long time before our carriers can get devices. 

Senator KLOBUCHAR. Exactly. 

Thank you very much. 

Senator PRYOR. Thank you. 

Senator Ayotte. 

STATEMENT OF HON. KELLY AYOTTE, 

U.S. SENATOR FROM NEW HAMPSHIRE 

Senator AYOTTE. Thank you, Mr. Chairman. 

I appreciate the witnesses being here today. 

Mr. Ford, I’ve got constituents in more rural areas of New Hampshire—Coos, Carroll County, and to some extent, Grafton County— 

that really don’t yet have full access to the wireless or broadband 

capacity that they need. Roughly a third of American households 

don’t even have a landline. 

And then, for economic activity and growth, what can we do to 

increase access and deployment in these areas? How does a competitive marketplace increase access in more rural settings? 

I’m also going to have a follow-up to Mr. Berry. Understanding 

you represent the smaller carriers, I’d like to hear your thoughts. 

I’m not a big fan of the Universal Service Fund, the way it is structured now, because New Hampshire is a $25 million annual net 

donor. We have these needs that I’m talking about that are real 

needs in rural areas of my state. 

I’d ask Mr. Ford, first, just from the competitive side, what are 

your thoughts on rural development? 

Mr. Berry, count me as someone who doesn’t want New Hampshire to continue to be a net dolor to this fund. As someone who 

represents the smaller carriers, how do you suggest we address the 

disparity and equity issue of states like mine receiving 37 cents for 

every dollar we contribute to the Universal Service Fund? 

Starting with Mr. Ford. 

Mr. FORD. Well, whether the market is competitive or not, there 

are going to be areas of the country where it just doesn’t pay for 

a private company to provide service. And, in those cases, if the 

Government can make it happen, they’ve got to come in with some 

kind of universal service program. But, like you have noted, those 

programs aren’t all that good. And that’s the—a fundamental problem with government trying to do nearly anything, and the problem with just being—living in a place where it’s not economic to 

serve. In some cases, there’s an economic case that comes from a 

78 

carrier, who wants to be nationwide and wants to sell coverage, 

who might cover an area that’s not really profitable, in and of 

itself, except for the fact that people may vacation there or drive 

through or something like that. But, there are just a lot of areas 

where there’s no business case. If the Government wants to come 

in and try to create a business case in some way, that’s possible. 

Competition is a problem, in some respects, because, in the old 

days, we did, sort of, internally funded universal service, where a 

carrier served the whole area, and he would take profits from an 

urban area and shift them over there, and that was fine. When 

competition developed, the margins were stolen by the competition, 

and you couldn’t support that internal subsidy. 

There are probably some very creative ways to do it. I think that 

Universal Service may keep people from really searching out those 

competitive ways to solve that problem. You know, the Government 

could do some simpler things—build backhaul towers that could be 

shared, those sorts of things. I just don’t think there’s much discussion of that—I’m not certain of that—partly because there is this 

system that’s supposed to take care of it, and people kind of think 

that’s going to do it. 

Senator AYOTTE. Right. 

Mr. FORD. And it doesn’t. And if I wanted to, maybe—if I could 

get a little bit of money—I talked to a guy who had arranged to 

build a wireless network on some water towers in a little community in north Alabama, and he couldn’t get any help to do it. It 

wasn’t very expensive—$60,000 or something is all he needed. 

Couldn’t get it from the NTIA on the broadband thing. You know, 

I think it’s just really a failure of an institution. And maybe that 

institution will always fail. Maybe government just can’t do it, and 

we just have to live with it. 

Senator AYOTTE. Mr. Berry? 

Mr. BERRY. Thank you, Senator. 

Universal Service Fund and CAF, the Connect America Fund. 

You should be outraged that there—— 

Senator AYOTTE. I’m outraged for my constituents—— 

Mr. BERRY. Well, you should be. 

Senator AYOTTE. You don’t have to tell me. 

Mr. BERRY. Well, you share the same position as most of the 

wireless carriers. We contribute 44 percent to the Universal Service 

Fund, and wireless carriers take less than 20 percent of the Universal Fund dollars. The so-called ‘‘reform’’ on USF was disastrous 

to wireless—rural wireless carriers. It totally decimated the revenue. Sixty percent increase to ILECs, 6 percent increase to 

RLECs—rural electric; 60 percent reduction to wireless carriers. 

It’s an outrage to say that we did anything to improve broadband— 

high-speed mobile broadband in rural America. And your state was 

one of the ones that got really severely hit. 

I’d like to see a program at the FCC that is technology neutral 

and gives everyone an opportunity to bid. What they’re doing with 

CAF–1 and CAF–2 and the Mobility Fund, I think it was outrageous. And the wireless carriers continue to support USF contributions—like I say, to 44 percent of the total fund—and take almost nothing. 

79 

There’s a few things—I’d love to talk to you, offline, on some of 

the things that we’re working on at the FCC to make them—or at 

least get them to look at their next phase of CAF–1 and CAF–2. 

You’re talking about a CAF–1—Connect America 1—for wireline 

companies that was $300 million, and $185 million of it was not 

accepted by the wireline companies, because they did not want to 

commit to carrier-of-last-resort responsibilities. We had wireless 

carriers more than willing to do that. So, I’m sitting there saying, 

‘‘What’s the policy that we should pursue?’’ We should recognize 

that, in some areas of the United States, wireless will be the most 

efficient and most effective deployment of high-speed mobile 

broadband. And the Federal Government ought to recognize that, 

it is a substitute technology. 

So, I’d love to talk to you about some of the things that we’re 

working on, and hopefully, you know, we could make some positive 

inroads down there. 

Thank you. 

Senator AYOTTE. I would appreciate that. 

And I know that my time is up. I’ve got a couple of more questions that I will submit for the record. 

But, I appreciate you all being here, and I’m glad to hear that 

you’re as outraged as I am for New Hampshire. 

So, thank you. 

Senator PRYOR. Senator Ayotte, thank you for being here. 

And I do have one follow-up question for Ms. Derakhshani, and 

it’s about cramming. Years ago, when I was Attorney General, we 

dealt a lot with this, just on your home telephone and cramming 

on bills. I remember, with telephone service, it was hard, because 

your typical telephone bill is not the same every month, you know, 

depending on if you’re using long distance or whatever’s going on. 

So, sometimes the customer doesn’t really know, kind of, what 

their average is; and if it’s a little high one month, they don’t even 

look at it. And I assume that’s pretty true with a lot of wireless 

plans, as well. I mean, you can get the packages and get all the 

data and all that. But, you know, a lot of this just depends on 

month-to-month. 

So, the question is, do you think that the wireless companies 

should do something proactive? Like, for example, maybe send a 

text to their customers when something is placed on the bill so the 

customer can be notified and see it and verify it. 

Ms. DERAKHSHANI. Absolutely. We were really glad that this was 

the case in the bill-shock proceeding. We hope that this is an effective way to alert consumers, to help ensure that they don’t go over 

their plan limits. 

We were really glad to see that the landline rules were put into 

effect last year at the FCC. These rules more clearly separated out 

third-party charges. We would love to see this for the wireless context, as well. 

But, I really do think that carriers need to play an active role 

in ensuring that consumers are provided with the tools and the information that they need—not only to make meaningful choices, 

but to also protect themselves against abusive practices. 

Senator PRYOR. Thank you. 

80 

Well, I want to, again, thank the panel. We’ve kept you for 2 full 

hours. I don’t think that was our intention. But, I think we had 12 

Senators come and ask good questions, and a couple, three, asked 

two rounds’ worth. So, I want to say thank you very, very much 

for your participation today, and your preparation. 

This is going to conclude the hearing, but what I want to say before I drop the gavel is that we will keep the record open for 2 

weeks, and members can submit questions. And some of them said 

that they would submit questions. So, we’d appreciate you all getting back with us as quickly as you can, once those questions come 

in. 

Again, thank you all for your participation. You’re outstanding 

and really helped the Subcommittee understand the lay of the land 

when it comes to wireless. 

We’re adjourned. 

[Whereupon, at 4:31 p.m., the hearing was adjourned.] 

(81) 

A P P E N D I X 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. AMY KLOBUCHAR TO

STEVEN K. BERRY

Question. Consumers who have made investments in their devices, which are not 

always cheap, should be able to take their purchases with them to any network, 

unlocking is one way to ensure this . . . interoperability is another. Consumers 

don’t always realize that they are being cornered into one service by a device. How 

does lack of interoperability impact the rollout of 4G service to rural America and 

the quality and cost of services they receive? 

Answer. The lack of interoperability in the Lower 700 MHz spectrum band has 

a significant negative impact on a carrier’s ability to provide 4G LTE mobile 

broadband service to rural America. Absent interoperability, competitive carriers, 

including those who provide service in rural America, who have invested nearly $2 

billion in spectrum in the Lower 700 MHz band, are largely unable to secure the 

devices necessary to deploy and provide mobile broadband services. The Lower 700 

MHz band, known for its superior propagation characteristics, is particularly important for rural areas. Using this spectrum, competitive carriers can service rural 

areas more economically and with fewer towers than they would with higher frequency bands. The lack of interoperability is significantly impeding the rollout of 

4G service to rural America. 

As you noted during the hearing, interoperability is required for a consumer to 

take an unlocked phone and use it on another network. Similarly, interoperability 

is required to allow a consumer to access service through carrier roaming relationships with other networks while outside their home network area. 

The Federal Communications Commission (FCC) has an open proceeding pending 

on this issue, and I strongly encourage the Committee to urge the FCC to immediately restore interoperability to the Lower 700 MHz band. Restoring interoperability to the Lower 700 MHz band would allow competitive, rural, and regional carriers to utilize low band spectrum that they have already purchased to deploy mobile broadband services in the rural areas that they have historically served. In 

turn, millions of rural, regional, and lower-income Americans will gain access to 4G 

LTE mobile broadband services, and will see increased competition and innovative 

pricing and plans in their local markets. 

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