```

[Senate Hearing 110-1125]
[From the U.S. Government Publishing Office]

                                                       S. Hrg. 110-1125

                    700 MHz AUCTION: PUBLIC SAFETY 
                         AND COMPETITION ISSUES
=======================================================================

                                HEARING

                               Before The

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 14, 2007

                               __________

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

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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                   DANIEL K. INOUYE, Hawaii, Chairman
JOHN D. ROCKEFELLER IV, West         TED STEVENS, Alaska, Vice Chairman
    Virginia                         JOHN McCAIN, Arizona
JOHN F. KERRY, Massachusetts         TRENT LOTT, Mississippi
BYRON L. DORGAN, North Dakota        KAY BAILEY HUTCHISON, Texas
BARBARA BOXER, California            OLYMPIA J. SNOWE, Maine
BILL NELSON, Florida                 GORDON H. SMITH, Oregon
MARIA CANTWELL, Washington           JOHN ENSIGN, Nevada
FRANK R. LAUTENBERG, New Jersey      JOHN E. SUNUNU, New Hampshire
MARK PRYOR, Arkansas                 JIM DeMINT, South Carolina
THOMAS R. CARPER, Delaware           DAVID VITTER, Louisiana
CLAIRE McCASKILL, Missouri           JOHN THUNE, South Dakota
AMY KLOBUCHAR, Minnesota
   Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Lila Harper Helms, Democratic Deputy Staff Director and Policy Director
    Christine D. Kurth, Republican Staff Director and Chief Counsel
Kenneth R. Nahigian, Republican Deputy Staff Director and Chief Counsel

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 14, 2007....................................     1
Statement of Senator DeMint......................................     3
    Prepared statement...........................................     3
Statement of Senator Dorgan......................................    62
Statement of Senator Inouye......................................     1
Statement of Senator Kerry.......................................    91
    Prepared statement...........................................    94
Statement of Senator Klobuchar...................................    10
Statement of Senator Lautenberg..................................     7
Statement of Senator Lott........................................    50
    Letter, dated June 13, 2007, from the Rural Cellular 
      Association and Cellular South to the FCC..................    50
Statement of Senator Rockefeller.................................     5
    Prepared statement...........................................     6
Statement of Senator Smith.......................................     9
Statement of Senator Stevens.....................................     2
Statement of Senator Sununu......................................     8
Statement of Senator Thune.......................................    90

                               Witnesses

Barksdale, James L., Partner, Frontline Wireless, LLC............    16
    Prepared statement...........................................    19
Cosgrave, Paul J., Commissioner and CIO, Department of 
  Information Technology and Telecommunications, City of New York    44
    Prepared statement...........................................    48
Lynch, Richard J., Executive Vice President and Chief Technical 
  Officer, Verizon Wireless......................................    66
    Prepared statement...........................................    68
McCarley, Wanda S., Operations and Training Manager, Tarrant 
  County 9-1-1 District, Fort Worth, Texas; President, 
  Association of Public-Safety Communications Officials--
  International (APCO); Board Member, National Public Safety 
  Telecommunications Council (NPSTC).............................    11
    Prepared statement...........................................    13
Sarva, Amol R., CEO, Txtbl.......................................    79
    Prepared statement...........................................    80
Small, Michael, Chief Executive Officer, Centennial 
  Communications Corporation.....................................    73
    Prepared statement...........................................    75
Weiser, Philip J., Professor of Law and Telecommunications, 
  Executive Director of the Silicon Flatirons Program, University 
  of Colorado....................................................    34
    Prepared statement...........................................    36

                                Appendix

Montanari, Pam, Radio Systems Manager, Pinellas County, Florida, 
  Chairperson, Tampa Bay Urban Area Interoperable Communications, 
  prepared statement.............................................    95
Response to written questions submitted by Hon. Daniel K. Inouye 
  to:
    James L. Barksdale...........................................    98
    Paul J. Cosgrave.............................................   103
    Richard J. Lynch.............................................   106
    Wanda S. McCarley............................................    97
    Amol R. Sarva................................................   113
    Michael Small................................................   111
    Philip J. Weiser.............................................   102
Response to written questions submitted by Hon. John Kerry to:
    Richard J. Lynch.............................................   107
    Amol R. Sarva................................................   114
Response to written questions submitted by Hon. Frank R. 
  Lautenberg to:
    Richard J. Lynch.............................................   110
    Michael Small................................................   112
Response to written questions submitted by Hon. Bill Nelson to:
    James L. Barksdale...........................................   101
    Paul J. Cosgrave.............................................   104
    Richard J. Lynch.............................................   109
    Wanda S. McCarley............................................    98
    Amol R. Sarva................................................   114
    Michael Small................................................   112
    Philip J. Weiser.............................................   102

                    700 MHz AUCTION: PUBLIC SAFETY 
                         AND COMPETITION ISSUES

                              ----------                              

                        THURSDAY, JUNE 14, 2007

                                       U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:02 a.m. in 
room SR-253, Russell Senate Office Building, Hon. Daniel K. 
Inouye, Chairman of the Committee, presiding.

          OPENING STATEMENT OF HON. DANIEL K. INOUYE, 
                    U.S. SENATOR FROM HAWAII

    The Chairman. The broadcasters are required by law to turn 
off their analog signals on February 17, 2009. As we approach 
this deadline, the FCC faces decisions that will shape the 
future of public safety and commercial communications services. 
The Commission appears ready, at long last, to adopt final 
service rules that will govern the auction and reuse of 
frequencies in the 700 MHz band. As with most communications 
policies that offer great promise, the 700 MHz band auction 
also offers great complexity. But if history is our guide, the 
decisions that the FCC will soon make in establishing service 
rules have the potential to revolutionize the communications 
landscape and to lay the foundation for the future development 
and deployment of new wireless broadband services.
    Because radio waves operating in the 700 MHz band can 
travel long distances and can penetrate through walls, they are 
uniquely capable of extending next-generation broadband 
services to parts of America that current technologies fail to 
reach. As some have noted, these frequencies are the equivalent 
of the new beachfront property in the increasingly crowded 
market for spectrum real estate.
    For public safety, the stakes are very high. In many 
cities, their narrow-band voice communications systems already 
chafe under capacity constraints. For that reason, we must 
ensure that our band clearing efforts stay on track.
    In addition, our efforts must also recognize that the 
future of public safety does not depend on voice communications 
alone. The 700 MHz proceeding offers our country a unique--and 
perhaps historic--opportunity to establish rules that will 
promote the development and operation of next-generation 
broadband networks for public safety. With proper planning and 
safeguards, these networks could be designed, from the outset, 
to be interoperable. They could reap the benefits of greater 
economies of scale and promote greater efficiency in the use of 
scarce spectrum resources.
    Without question, the concept of a partnership between 
public safety and a commercial operator, as some have 
suggested, would represent a paradigm shift in the way 
traditional public safety communications have been managed and 
operated. It raises many difficult questions that must be 
carefully considered and answered.
    But the difficulty of the task should not alter the 
responsibility of our regulators to meet the needs of first 
responders and to facilitate the development and use of 
cutting-edge communications technologies that will be essential 
to protecting the safety of current and future generations.
    In my opinion, we are well past the question of whether we 
should help first responders build and operate a nationwide 
interoperable broadband network. Instead, it is time that we 
focus on what we must do to accomplish this goal as quickly as 
possible.
    In addition to the unique opportunities that service rules 
may offer for public safety, the upcoming auction of commercial 
spectrum has the potential to reward consumers with substantial 
benefits in the rollout of new wireless broadband services. 
Yet, despite such promise, there are lingering concerns that 
the FCC's current service rules, which favor large spectrum 
blocks and large geographic license areas will limit 
participation in the auction and will provide established 
incumbents with an opportunity to strengthen their control over 
existing spectrum resources.
    While changes to these rules are under consideration, it is 
important that the Commission recognize the dangers of further 
consolidation and adopt rules that will attract new entrants 
and promote competition.
    Similarly, it is my hope that the Commission will remember 
that a spectrum auction represents a means to an end, not an 
end in itself. There is no question that the auction of 700 MHz 
frequencies will yield the Treasury substantial sums of money, 
but we should not let that fact seduce us into forgetting the 
importance of designing service rules that also meet other 
critical policy goals. This auction must ensure a diversity of 
license ownership, promote Universal Service and the deployment 
of services beyond major cities and highways, and encourage 
entrepreneurship and the development of innovative technologies 
and applications that will stoke demand for highspeed service. 
In sum, there's a lot at stake.
    We are fortunate today to have two distinguished panels of 
witnesses to assist us in examining these issues. And I look 
forward to their testimony and their answers to our questions.
    But, before I do, may I call upon the distinguished Vice 
Chairman of the Committee?
    Senator Stevens. Well, I was late. If my friend is ready, 
go ahead.
    Senator Rockefeller. I'd yield to you.
    Senator Stevens. Thank you.

                STATEMENT OF HON. TED STEVENS, 
                    U.S. SENATOR FROM ALASKA

    Senator Stevens. Well, I applaud my good friend, the 
Chairman, for calling this hearing to examine the 700 MHz 
auction and the public safety issues.
    We're now 4 months closer to the 700 MHz auction than the 
last time the Committee held a hearing looking at the public 
safety proposal that would use some of the auctioned spectrum. 
This new proposal involves less spectrum for auction, and does 
not fix the price in advance. Still, there are, to me, 
outstanding questions to be resolved, and I hope the witnesses 
will answer many of the questions regarding how this public 
service--how this will serve the public safety interests and 
the interests of the American taxpayers, as well as really 
control the spectrum. I think that's the primary issue, as far 
as I'm concerned. It's important that all proposals be examined 
to ensure that Congress is doing as much as we possibly can to 
save the lives of our first responders, and help them save 
other lives. But we must also be sure that we're not always 
examining, and never acting. We must make some decisions now on 
this proposal.
    Separately, we'll hear, I understand, a discussion of new 
proposals for the rules surrounding the commercial side of the 
700 MHz auction. Some of those issues are technical in nature, 
and impact business plans and business strategies. By the end 
of our hearing, I hope that some common themes will emerge so 
the FCC can move forward in conjunction with Congress, and so 
we can all agree, and, in a timely fashion, hold this auction 
in a way that will secure the 24 MHz of spectrum in the 700 MHz 
bands for public safety on time, provide new wireless 
opportunities for consumers and small businesses, and ensure 
that taxpayers receive the full value for the use of the 
spectrum that's dedicated to the public interest.
    Thank you very much.
    The Chairman. Thank you.
    Senator DeMint?

                 STATEMENT OF HON. JIM DeMINT, 
                U.S. SENATOR FROM SOUTH CAROLINA

    Senator DeMint. Thank you, Mr. Chairman.
    In the interest of time, I'd like to submit my entire 
statement here for the record and just make a couple of 
comments.
    Thank you for----
    The Chairman. Without objection.
    Senator DeMint. Thank you, sir.
    [The prepared statement of Senator DeMint follows:]

Prepared Statement of Hon. Jim DeMint, U.S. Senator from South Carolina
    Thank you, Mr. Chairman, for scheduling this hearing. I also want 
to thank the panelists with us today.
    The amount of activity and interest in this DTV transition just 
goes to show how very important and valuable this public asset--the 700 
MHz spectrum--is to our economy, our public safety, and our individual 
constituents' daily lives.
    After much hard work and many long years, we are finally close--
within months--of realizing the opportunities that the 700 MHz spectrum 
presents. With this spectrum finally cleared and licensed, we will have 
more tools to attack difficult issues like public safety 
interoperability, universal service, and the digital divide.
    It is vitally important that we move ahead with wireless broadband 
in this Nation. Beyond mobility and the potential ``third pipe'' it 
will offer into American homes, it presents us with a great chance to 
leapfrog where we are today with funding less efficient and more 
expensive technologies through our Universal Service Fund.
    Innovation will only increase as commercial applications and 
consumer demand grow in this space. That is why it is vital that the 
FCC develop flexible rules that allow current providers as well as new 
entrants the ability to bid on this spectrum and develop it as the 
market demands.
    But, we aren't there yet. The Commission has some big decisions to 
make, hopefully in the coming weeks, about the rules for this auction. 
Those include:

        1. whether to competitively auction all of the 60 MHz remaining 
        for commercial services;

        2. the geographic sizes of the licenses to be auctioned;

        3. and what, if any, usage rules to impose on the winning 
        bidders.

    Mr. Chairman, several of my fellow colleagues joined me in a letter 
this week to the FCC Commissioners outlining our thoughts on the 
proceedings currently underway. I would like to ask consent to make 
this part of the record.
    I believe it is important that the entire 60 MHz of available 
spectrum be auctioned competitively. This means that there should not 
be special restrictions placed on any portion of it that would either 
suppress interest from other bidders or benefit a particular business 
model. I urge the Commission to avoid weakening or skewing the role of 
market forces in this auction process.
    There are some who seek more spectrum for public safety 
interoperability in addition to the 24 MHz already set aside. While I 
appreciate their sincerity and good intentions, I do feel that they 
seem to have made up their minds before we have had a chance to 
actually get to the 24 MHz already set aside and fully develop its 
potential. Also, I feel there are great opportunities for the public 
safety community with the spectrum, technologies, and public/private 
partnerships already available today.
    As for the appropriate size of licenses, I believe that the 
Commission should be guided by what is best for the American people and 
not individual bidders. The winners of this auction, if conducted 
properly, will be consumers. They should expect the benefits of more 
options, lower costs, and better services. There is a place for 
smaller, more localized licenses, and I feel the Commission's Lower-700 
MHz band plan accounts for this.
    But, there is clearly value in large-area licenses, as well. I know 
my constituents are ready for nationwide mobility and wireless 
broadband speeds comparable to DSL and cable. It seems to me that the 
most efficient way to get there is to offer bidders the opportunity to 
provide services immediately to a wide area and substantial population.
    Finally, I urge the Commission to avoid imposing rules on the 
services provided by winning bidders like net neutrality or open access 
requirements. Government regulation has not created 200 million 
wireless phone users in our country. Neither has it made wireless 
Internet the viable option it is becoming today. These developments 
have occurred because the market has been allowed to work and innovate, 
and competition has been presented to consumers. As always, regulation 
in search of a problem should be avoided, and I urge the Commission to 
do so in this case.
    Thank you again, Mr. Chairman. I look forward to hearing the 
thoughts of my colleagues and our panelists.
                                 ______
                                 
                                               U.S. Senate,
                                      Washington, DC, June 13, 2007
Hon. Kevin J. Martin,
Chairman,
Federal Communications Commission,
Washington, DC.

Dear Chairman Martin,

    We are writing to express support for improving our Nation's public 
safety communications, expanding wireless broadband for consumers, and 
maximizing value to U.S. taxpayers. Specifically, we support your 
efforts to bring broadband capability to the 24 MHz Congress allocated 
for public safety use in the Digital Television Transition and Public 
Safety Act of 2005.
    To facilitate wireless broadband, particularly in rural areas, we 
believe that a mix of license sizes for the 700 MHz auction is 
critical. Larger licenses are needed to facilitate next-generation 
wireless networks and will bring more broadband choices to U.S. 
consumers sooner, while smaller license areas are essential to create 
opportunities for small and mid-sized wireless carriers.
    In the past, disregarding Congressional intent for market-driven 
auction policy has resulted in spectrum lying fallow for years, 
extensive litigation, and consumers being denied the benefits of 
wireless technology innovations. The FCC should not devise encumbering 
rules which suppress interest in the auction, including build-out 
requirements, restrictions on incumbent bidding, net neutrality, and 
open access mandates.
    We hope that your auction rules will maximize the benefits of this 
important public asset and appreciate your prompt action in this 
proceeding.
            Sincerely,
                                   Jim DeMint
                                   John Ensign
                                   John E. Sununu
                                   Mel Martinez
                                   Kay Bailey Hutchison
                                   David Vitter

    Senator DeMint. I want to thank both panels. I can't stay 
for both of them, but I appreciate the wisdom, hopefully, 
they'll bring today.
    I know, Mr. Chairman, you mentioned some concerns about 
consolidation and the need for, really, a diversity of 
competition and to stir innovation, which is certainly my hope, 
as well.
    We have to find a balance between the number of competitors 
and the ability of larger networks to provide national and 
international service. It's very important that the way this 
auction works would allow the larger companies to establish a 
seamless network. That form of consolidation is certainly not 
negative, and that's the balance I hope we can achieve, because 
ultimately it's what the customers need that matters, which is 
a seamless national/international network, and future of 
highspeed broadband that is wireless, which would require 
certain chunks of that spectrum be available to networks who 
want to provide it.
    So, that's what I hope we can come out with today, is a way 
that we can encourage a lot of competition, innovation, the 
diversity of competition; at the same time, allow the networks, 
with the capability, to provide--or to purchase large enough 
chunks and bandwidth to provide the services that customers 
will need in the future.
    Thank you, Mr. Chairman. I yield back.
    The Chairman. I thank you.
    Senator Rockefeller?

           STATEMENT OF HON. JOHN D. ROCKEFELLER IV, 
                U.S. SENATOR FROM WEST VIRGINIA

    Senator Rockefeller. Thank you, Mr. Chairman.
    I'll shorten this.
    Obviously, we can't underestimate the potential for the 700 
MHz auction to transform society. The FCC has to recognize, has 
to maximize, the public-interest benefit of this auction. 
Spectrum is highly valuable, it's very scarce, it does not 
belong to any broadcasters; it belongs only to the American 
people, and is only used with the consent of us.
    Congress and the FCC, as guardians of this scarce public 
resource, must make sure all Americans benefit from this sale. 
In my opinion, the FCC must address two fundamental questions 
when developing the rules for this auction. First, we must make 
sure that the spectrum needs of the public safety community, as 
Senator Stevens indicated, are addressed. We have totally 
failed with respect to this. We have added homeland security 
responsibilities without providing the resources to meet these 
new challenges. We have not adequately addressed the issue of 
interoperability. Now, if the FCC fails to develop an adequate 
spectrum plan that addresses the needs of public safety, 
policymakers will have failed them once again, and we may not 
be able to rectify that in the future.
    As my good friend, Commissioner Copps has stated, the 
question of public safety is the first obligation of the public 
servant. In a more perfect world, our Nation's first responders 
would already have access to an interoperable and fully funded 
broadband network that makes use of dedicated public safety 
spectrum. We are a very long way from getting that, 
particularly in our rural areas, and this is something we 
should all be very much ashamed of.
    I voted against the last spectrum bill, Mr. Chairman, 
because I thought it was just a money grab. It wasn't thought 
out. And I think--Senator Stevens might not agree on this, but 
I think it's really important that the FCC gets it right before 
it presents the auction. The American public does not 
understand spectrum. Committee attendance is sparse here today. 
Those who are here do care. But it's very much like aviation--
very important subject, not a lot of attendance, not a lot of 
knowledge.
    But the consequences of this are overwhelming. And if it 
meant that we had to give the FCC, depending upon where they 
stand--and I'm not confident of where they stand--an extra 2 
months to prepare for an auction, then I think we should do 
that. But if this is just another effort to raise money for the 
Federal Government, I'm going to vote against it again.
    Thank you.
    [The prepared statement of Senator Rockefeller follows:]

             Prepared Statement of John D. Rockefeller IV, 
                    U.S. Senator from West Virginia
    The 700 Megahertz (700 MHz) proceeding before the FCC is 
extraordinarily complex even for communications policy. I believe that 
the upcoming auction is perhaps the most important that the FCC will 
ever conduct. It is undeniable that the outcome of the FCC's decisions 
will have a significant impact on the development of next generation 
broadband networks for public safety and on the competitive landscape 
for wireless broadband services in the United States.
    As this Committee has heard on numerous occasions, the soon-to-be 
freed-up 700 Megahertz (MHz) variety is among the most valuable 
spectrum of all because of its uniquely favorable propagation 
characteristics. This spectrum is crucial for bringing new wireless 
broadband services to our Nation. We cannot underestimate its potential 
to transform society.
    The FCC must maximize the public interest benefit of this auction. 
Spectrum is a highly valuable and scarce resource. It belongs to West 
Virginians. It belongs to the American people. Congress and the FCC, as 
guardians of this scarce public resource, must make sure all Americans 
benefit from its sale.
    In my opinion, the FCC must address two fundamental questions when 
developing the rules for this auction. First, we must make sure that 
the spectrum needs of the public safety community are addressed. For 
too long, Congress has failed our first responders. We have added 
homeland security responsibilities without providing the resources to 
meet these new challenges, and we have not adequately addressed the 
issue of interoperability. Now, if the FCC fails to develop an adequate 
spectrum plan that addresses the needs of public safety, policymakers 
will have failed them once again. And, we may not ever be able to 
rectify this failure.
    As my good friend Commissioner Copps has stated, ``the question of 
public safety is. . .the first obligation of the public servant.'' In a 
more perfect world, our Nation's first responders would already have 
access to an interoperable and fully-funded broadband network that 
makes use of dedicated public safety spectrum. We are a long way from 
getting public safety this network, and that is something we all should 
be ashamed of.
    The FCC should consider a number of innovative new approaches to 
addressing this issue. I am not ready to endorse any one of them, but 
it is incumbent upon the FCC to evaluate these proposals. The public 
interest demands it.
    The basic idea of a network that will be used by both commercial 
and public safety users is deeply appealing to me, with commercial 
users generating enough revenue to build and operate the network and 
with public safety users able to preempt commercial users during an 
emergency. But, I understand the many challenges before the FCC and the 
industry in making this goal a reality.
    I believe that the second issue the FCC must address, as it seeks 
to maximize the public benefit, is how to make sure all Americans, 
especially rural Americans, are provided the new and innovative 
wireless services that this auction is certain to bring.
    Wireless services in my state are inadequate. Vast stretches of 
West Virginia do not have wireless voice coverage, much less data 
coverage. Again, let me state that spectrum belongs to all Americans 
and the FCC rules need to make sure all Americans benefit from the new 
services and competition that companies using this spectrum will bring 
to consumers.
    When the Congress voted to auction the existing broadcast spectrum, 
this Committee's only concern was raising as much money for the 
Treasury as possible. I voted against that bill because without 
marrying it to good public policy, we achieve nothing. The FCC's 
highest priority is making sure that the 700 MHZ auction is done to 
maximize the public interest and just not to maximize the revenue to 
the treasury.

    The Chairman. Thank you very much.
    Senator Lautenberg?

            STATEMENT OF HON. FRANK R. LAUTENBERG, 
                  U.S. SENATOR FROM NEW JERSEY

    Senator Lautenberg. Thanks, Mr. Chairman.
    Obviously, this is a fairly complicated subject, but one 
that we must deal with, and deal with as fairly and equitably 
as we can.
    The 700 MHz spectrum has been described as the beachfront 
property of the spectrum, which implies the most valuable part 
of the land or the property. And so, first we have to make sure 
that we maximize its availability. It's a limited, valuable 
resource, and so, we've got to do the best that we can to use 
it.
    Second, we want to protect it. Whoever controls that 
property must act with the interest of the public as its 
primary obligation. In terms of that analogy, the same is true 
for the 700 MHz spectrum. Spectrum is a valuable natural 
resource. It's a small portion of the public airwaves that 
could bring inexpensive highspeed and wireless Internet across 
to customers, the biggest companies, as well as to the ordinary 
American in a public park or a coffee shop, because of its 
ability to travel at great speeds and great distances, able to 
penetrate walls. Many said it could be the backbone of a 
national wireless broadband network. And we know we've got to 
improve access to broadband.
    The United States lags 15th in the world in the percentage 
of people with broadband connections, according to the 
International Telecommunications Union. Considering that the 
Internet access today is essential for everything from 
communications to education, public safety, we've got to 
improve our situation, relative to the rest of the world and 
the needs of our people. We've got to explore every option for 
increasing broadband deployment. For example, I have proposed 
allowing cities and towns to provide broadband networks of 
their own to their residents, and the 700 MHz spectrum creates 
a new opportunity to provide widespread broadband access.
    It has also got to improve public safety's ability to 
communicate. Senator Rockefeller mentioned something. A 
significant part of the casualties on 9/11 were people from New 
Jersey and we found out that the inability to communicate was a 
real deterrent to rescuing these people. And we still don't 
know what the aftereffects of exposure there are.
    So, we've got to find a way to ensure that local police and 
firefighters in our large cities can speak to one another, and 
also look ahead to make sure that their equipment in the future 
is capable of exchanging data and video over broadband. The 700 
MHz spectrum will also benefit those costs. As we explore this 
spectrum with the auction, we've got to make sure that a system 
is in place that both generates revenue for our businesses and 
guarantees this resource is used for the public good.
    And, Mr. Chairman, one of the things that I'd like to make 
sure that we go into with a degree of depth, and that is this 
can't be an asset that's casually held and--I'll use the term 
``flipped''--for a profit, that this has to be put to the 
public use, and some warrantees or guarantees that that's the 
objective.
    So, I thank you, Mr. Chairman, and thank all of the 
witnesses for your participation.
    Thank you, Mr. Chairman.
    The Chairman. I thank you very much.
    Senator Sununu?

               STATEMENT OF HON. JOHN E. SUNUNU, 
                U.S. SENATOR FROM NEW HAMPSHIRE

    Senator Sununu. Thank you, Mr. Chairman.
    I'd like to just make three points in my opening statement, 
and the first is simple, and may be the most important, that we 
need to complete this process. We absolutely need to get this 
done. The law says we need to get this done--January 28, 2008. 
And we should certainly stick to the law. Completing the 
process in a timely way is right for consumers. And getting 
them access to the spectrum that Senator Lautenberg was talking 
about, whether it's additional wireless services, broadband, or 
other innovations that we can't quite foresee, completing the 
process is essential. It's right for public safety, as well, 
getting them access to the additional spectrum that really will 
make a difference, in the long run, to their ability to 
communicate, and also to adapt new services for their own 
public safety needs.
    Second fundamental point is, we need to avoid regulations, 
mandates, encumbrances on the spectrum that's being auctioned 
off. Every regulation, every mandate, every additional 
requirement we place on this spectrum is going to reduce the 
number of competitors that come forward to bid, it's going to 
reduce investment in the systems, it's going to reduce 
innovation, and, ultimately, that's going to hurt the 
interested parties: consumers and public safety.
    And, finally, with regard to the question of 
interoperability, we hear a lot of talk about interoperability, 
how important it is, how much we care about it. We're going to 
allocate funds to support interoperability, as we should, those 
funds coming from this auction. But the biggest problem that I 
see in the area of interoperability isn't the availability of 
funds, per se, but it's the reluctance, in many cases, of first 
responding organizations themselves to embrace open standards, 
to embrace new technologies, and even to coordinate their own 
purchasing across different organizations. There are counties, 
even some cities, in America where police and fire fighters 
still can't communicate effectively with one another. And 
that's not for a lack of spectrum. And, in many cases, it's not 
for a lack of funding, but for a lack of coordination and 
organization, setting aside turf issues and working together on 
a coordinated acquisition plan.
    So, we need to focus on interoperability, insofar as 
getting the resources available at the Federal level to support 
some of these acquisition efforts, but I think there's also a 
change in approach and in mentality that needs to go along.
    This is very important to get done, to get done in a timely 
way, and get done in a way that really supports the needs of 
consumers and public safety, and I hope some of the obstacles 
and hurdles to getting that done in a timely way are discussed 
in earnest today.
    Thank you, Mr. Chairman.
    The Chairman. I thank you very much.
    Before proceeding, I'd like to recognize the presence of a 
very distinguished former Chairman of this Committee, Senator 
John C. Danforth.
    Welcome, sir.
    [Applause.]
    The Chairman. You want to take over?
    [Laughter.]
    Senator Stevens. Would you just say a prayer for us?
    [Laughter.]
    The Chairman. Senator Smith?

              STATEMENT OF HON. GORDON H. SMITH, 
                    U.S. SENATOR FROM OREGON

    Senator Smith. Thank you, Mr. Chairman, for this hearing.
    The auction of 700 MHz band presents a unique opportunity 
to both improve our Nation's public safety communications and 
expand wireless broadband access for consumers. I encourage the 
FCC to expeditiously adopt service rules that facilitate 
expanded wireless broadband service offerings for consumers in 
rural communities and large cities, alike.
    But I'd like to speak, this morning, a bit about the 
opportunity this auction presents for public safety and the 
tremendous work being done in my home State of Oregon regarding 
public safety communications.
    The Oregon State Interoperability Executive Council is 
chaired by Chief Jeff Johnson of the Tualatin Valley Fire and 
Rescue, with whom I met earlier this year. The Council has been 
charged with achieving public safety interoperability in 
Oregon. The group has been meeting for a few years. The Council 
has spent countless hours, beyond their public service day 
jobs, to design a statewide interoperable network. Following 
completion of the design for the network, the Council took the 
plan of--for interoperability to the state government for 
funding. The Oregon State Legislature, unfortunately, was 
unable to fund the $665 million needed to build this network.
    The Oregon State Legislature, like so many others across 
the country, having limited resources and any number of demands 
on it, determined it could not finance a statewide 
interoperability project for Oregon. I suspect this scenario 
will be replicated in every one of the 30-plus states that have 
state interoperability executive councils trying to resolve 
interoperability at the State level.
    Knowing that these resources are largely unavailable at the 
State and local level, and predicting that it would be equally 
difficult to find funds at the national level, if we are to be 
pragmatic, we must turn to solutions that could include the 
private sector. This is not unprecedented. There are a number 
of occasions where collaboration between the public and 
commercial sectors has yielded highly effective results. In my 
view, the FCC and this Committee, where appropriate, must take 
an active role in making this work.
    As many of us know, the FCC is already taking steps to 
facilitate such a nationwide shared network. While I do not 
necessarily agree with every aspect of this proposal being 
considered by the Commission, I applaud the steps that have 
been taken to recognize both the problem and the opportunity 
presented for public safety.
    This endeavor must be made a nationwide priority. We must 
create the road to nationwide interoperability. The example of 
State and local experience demonstrates that the solution must 
come on a national level. Let's not wait until the next 
disaster to start working on the creation of a nationwide 
mobile public safety broadband network.
    Thank you.
    The Chairman. Thank you very much.
    Senator Lott?
    Senator Lott. Mr. Chairman, thank you for having this 
hearing. And I'm anxious to hear the panel, so I will reserve 
my comments for later.
    The Chairman. I thank you.
    Senator Klobuchar?

               STATEMENT OF HON. AMY KLOBUCHAR, 
                  U.S. SENATOR FROM MINNESOTA

    Senator Klobuchar. Thank you, Mr. Chairman. Thank you for 
holding this hearing today.
    The 700 MHz auction gives us a unique opportunity in the 
public safety area. I come to the Senate having been a 
prosecutor for 8 years and running an office of 400 people, 
with a county that has 1.1 million people. I was very proud of 
the work that our sheriff, Pat McGowan, who has recently 
retired, but he was head of the National Sheriffs Association, 
the work he did in bringing interoperability to our town. Some 
of this came out of a case that was in the metropolitan area in 
the Twin Cities, where a St. Paul police officer was shot. 
Several different police officers had to pitch in to find the 
killers. The helicopter pilots assisting in the search had to 
carry 12 different portable radios with them so that they could 
individually radio each police department. This obviously led 
to some serious discussions in our area. Now, not only does 
Hennepin County, but the nine counties that make up the Twin 
Cities area are now all interoperable.
    This truly isn't the case in all of our State. I was just 
up, 2 weeks ago, in the Grand Marais area, way up on the 
Canadian border, where we just, tragically, had weeks of 
wildfires that started in Minnesota and then went up to Canada. 
In Minnesota alone, 200 buildings were destroyed, acres and 
acres and acres of forest. And there, I heard the same story 
that we heard as in the St. Paul Police Department issue, where 
there just was not interoperability, and there are all kinds of 
problems with communicating, where you have situations where 
they have to get to a house and get the people evacuated. And 
what they ended up being able to use was the community radio 
station, which, luckily, stayed available in most of their 
homes so they could give alerts of when different parts of the 
State were being evacuated.
    So, that's why I have come to this hearing with this very 
recent and poignant experience. And I'm hopeful that we will 
hear some good solutions to this very important issue.
    Thank you.
    The Chairman. Thank you very much.
    For our first panel of witnesses, we are most pleased to 
have the following: the President of the Association of Public-
Safety Communications Officials--International, and also the 
Operations Manager of the Tarrant County 9-1-1 District, Ms. 
Wanda S. McCarley; and a Partner in Frontline Wireless, Mr. 
James Barksdale; Professor of Law and Telecommunications and 
Executive Director of Silicon Flatirons Program of the 
University of Colorado School of Law, Professor Philip J. 
Weiser; and Commissioner of the New York City Department of 
Information Technology and Telecommunications, Commissioner 
Paul J. Cosgrave.
    May we begin with Ms. McCarley.

        STATEMENT OF WANDA S. McCARLEY, OPERATIONS AND 
 TRAINING MANAGER, TARRANT COUNTY 9-1-1 DISTRICT, FORT WORTH, 
 TEXAS; PRESIDENT, ASSOCIATION OF PUBLIC-SAFETY COMMUNICATIONS 
OFFICIALS--INTERNATIONAL (APCO); BOARD MEMBER, NATIONAL PUBLIC 
                            SAFETY 
               TELECOMMUNICATIONS COUNCIL (NPSTC)

    Ms. McCarley. Good morning.
    The Chairman. Good morning.
    Ms. McCarley. Thank you, Chairman Inouye, Vice Chairman 
Stevens, and members of the Committee, for this opportunity to 
appear before you today on behalf of the Association of Public-
Safety Communications Officials--International, APCO, and the 
National Public Safety Telecommunications Council, NPSTC.
    My name is Wanda McCarley, and I am the Operations and 
Training Manager for the Tarrant County 9-1-1 District in Fort 
Worth, Texas. I am currently the President of APCO 
International, and also serve on the NPSTC governing board. 
APCO works very closely with the International Association of 
Chiefs of Police and the International Association of Fire 
Chiefs, and I speak on their behalf today here, as well.
    Public safety agencies throughout the Nation have long had 
a critical need for additional spectrum to alleviate radio 
system congestion, to accommodate new communications tools, and 
to promote improved interoperability. Our Nation's first 
responders will need further spectrum resources to deal with 
the ever-growing demand for expanded voice, data, video, and 
broadband capability.
    We have also come to recognize that our country needs a 
national broadband network. This network must be built to 
public safety specifications, and it must be controlled by 
public safety entities. It should also leverage economies of 
scale while still meeting local needs. Such a network will 
allow for more efficient use of scarce spectrum, facilitate 
national standards, reduce costs for State and local 
governments, and, most importantly, promote nationwide 
interoperability.
    The FCC now has before it a one-time opportunity to provide 
for a public safety broadband network through its consideration 
of the 700 MHz auction rules. The public safety community has 
strongly urged the Commission to use this opportunity to 
establish the foundation for a public/private partnership that 
would deploy a fully interoperable nationwide public safety 
broadband network.
    Specifically, we have urged the FCC to impose conditions on 
the auction to promote a shared network that would create a 
synergy to provide first responders with access to additional 
spectrum while also leveraging the commercial spectrum.
    We believe there is simply no other viable method to fund a 
national broadband network for public safety. With the funding 
mechanism some local agencies may have, they may be able to 
fund local networks, others will not, and this creates a 
patchwork of have and have-nots with access to the system.
    Some have suggested that the Federal Government provide the 
dollars necessary to build a national network. While we would 
obviously welcome some Federal funding, we know how difficult 
that would be to achieve in this current budgetary environment. 
Others have suggested that public safety agencies simply rely 
on commercial networks. However, commercial-grade networks are 
not usually built to public safety specifications. Adequate 
coverage, reliability, functionality, and security are known 
issues. We believe the only viable option to fund a national 
public safety broadband network is through a public-private 
partnership.
    The FCC first addressed the potential for a public/private 
partnership last year, when it proposed that a portion of the 
700 MHz band already allocated for public safety be assigned to 
a single national public safety licensee. However, that 
licensee would not have the funding to deploy the network. Some 
have suggested that the national public safety licensee could 
simply issue an RFP seeking a partner to construct the network. 
The question still remains, how would the national public 
safety licensee pay for the network?
    This brings us to the innovative conditional auction 
approach that we believe is the best alternative. A key 
component of this approach is a network-sharing agreement with 
the national public safety licensee. We have urged that the FCC 
rules ensure that public safety is not forced into an 
unacceptable network-sharing agreement, and that the agreement 
must be negotiated prior to the issuance of the license to the 
auction winner. We believe that these are key components for 
the deployment of a national broadband network.
    Mr. Chairman, in conclusion, we believe that the FCC should 
adopt a conditional auction approach that requires the auction 
winner to build a broadband network that serves both public 
safety and commercial users, and is designed, built, and 
maintained to meet public safety requirements.
    I thank you, again, for the opportunity to appear before 
you today.
    [The prepared statement of Ms. McCarley follows:]

   Prepared Statement of Wanda S. McCarley, Operations and Training 
 Manager, Tarrant County 9-1-1 District, Fort Worth, Texas; President, 
 Association of Public-Safety Communications Officials--International 
(APCO); Board Member, National Public Safety Telecommunications Council 
                                (NPSTC)
    Thank you Chairman Inouye, Vice Chairman Stevens, and Members of 
the Committee for this opportunity to appear before you today on behalf 
of the Association of Public-Safety Communications Officials--
International (APCO) and the National Public Safety Telecommunications 
Council (NPSTC).
    My name is Wanda McCarley and I am the Operations and Training 
Manager for Tarrant County 9-1-1 District in Fort Worth, Texas. I am 
currently the President of APCO and also serve on the NPSTC Governing 
Board. APCO works very closely with the International Association of 
Chiefs of Police (IACP) and the International Association of Fire 
Chiefs (IAFC), both of which are also members of NPSTC, and I speak on 
their behalf today as well.
    APCO was established in 1935 and today it is the Nation's oldest 
and largest public safety communications organization, representing its 
16,000 members who manage and operate communications systems and 
facilities for police, fire, emergency medical and other state and 
local government public safety agencies. APCO's mission is to be a 
member driven association of communications professionals that provides 
leadership; influences public safety communications decisions of 
government and industry; promotes professional development; and fosters 
the development and use of technology for the benefit of the public.
    The National Public Safety Telecommunications Council (NPSTC) was 
formed 10 years ago to serve both as a resource and advocate for public 
safety organizations in the United States on matters relating to public 
safety telecommunications. NPSTC is a federation of public safety 
organizations dedicated to encouraging and facilitating, through its 
collective voice, the implementation of the Public Safety Wireless 
Advisory Committee (PSWAC) and the 700 MHz Public Safety National 
Coordination Committee (NCC) recommendations. NPSTC explores 
technologies and public policy involving public safety agencies, 
analyzes the ramifications of particular issues, and submits comments 
to governmental bodies with the objective of furthering public safety 
communications worldwide. NPSTC serves as a standing forum for the 
exchange of ideas and information for effective public safety 
telecommunications. The following 14 organizations participate in 
NPSTC:

        American Association of State Highway and Transportation 
        Officials

        American Radio Relay League

        American Red Cross

        Association of Fish and Wildlife Agencies

        Association of Public-Safety Communications Officials--
        International

        Forestry Conservation Communications Association

        International Association of Chiefs of Police

        International Association of Emergency Managers

        International Association of Fire Chiefs

        International Municipal Signal Association

        National Association of State Chief Information Officers

        National Association of State Emergency Medical Services 
        Officials

        National Association of State Foresters

        National Association of State Telecommunications Directors

    Several Federal agencies are liaison members of NPSTC. These 
include the Department of Agriculture, Department of Homeland Security 
(SAFECOM Program and the Federal Emergency Management Agency), 
Department of Commerce (National Telecommunications and Information 
Administration), Department of the Interior, and the Department of 
Justice (National Institute of Justice, CommTech Program).
    Public safety agencies throughout the Nation have long had a 
critical need for additional spectrum to alleviate radio system 
congestion, to provide first responders with new communications tools, 
and to promote improved interoperability. Responding to some of those 
needs, Congress passed legislation 10 years ago to clear the 700 MHz 
band of TV broadcasters and to allocate 24 MHz of that spectrum for 
public safety, with the remaining spectrum designated for auction. The 
FCC has already established initial rules for the 700 MHz public safety 
spectrum, allocating half of the 24 MHz for narrowband voice channels 
(some of which are already in use), and the remainder for data and 
reserve channels.\1\ However, in much of the Nation use of the spectrum 
is blocked by incumbent TV stations until February 17, 2009.
---------------------------------------------------------------------------
    \1\ The current rules limit the data channels to ``wideband,'' 
(i.e., channels of up to 150 kHz). A pending proposal would allow those 
data channels and the reserve channels to be consolidated to form 
``broadband'' channels (i.e., channels of at least 1.25 MHz).
---------------------------------------------------------------------------
    This allocation of 24 MHz of public safety spectrum was based upon 
needs identified over 10 years ago. However, even then, the Public 
Safety Wireless Advisory Committee had estimated that public safety 
would require an additional 70 MHz by the year 2010. The reality of 
course, is that public safety's spectrum needs have grown faster than 
anyone had anticipated, driven in part by 9/11 and the Nation's 
refocusing on public safety and homeland security requirements.
    Our nation's first responders will need further spectrum resources 
to accommodate the ever growing demand for expanded voice, data, video 
and other ``broadband'' communications capability. We have also come to 
recognize that our country needs a national broadband network that is 
built to public safety specifications, is controlled by public safety 
entities, and accommodates local variations to address first responder 
agency requirements. Such a network will allow for more efficient use 
of scarce spectrum resources, facilitate national standards, reduce 
costs for state and local governments, and most importantly, promote 
nationwide interoperability on a state-of-the-art communications 
system.
    The Federal Communications Commission (FCC) now has before it a 
one-time opportunity to provide for such a public safety broadband 
network through its consideration of the 700 MHz auction rules.\2\ The 
public safety community has strongly urged the Commission to use this 
opportunity to establish the foundation for a public-private 
partnership that would deploy a fully interoperable, nationwide public 
safety broadband network. Specifically, we have urged the FCC to impose 
conditions on the auction of 10 MHz of spectrum to ensure that the 
auction winner will build a broadband network serving both the 10 MHz 
of auctioned spectrum and a portion of the public safety spectrum (the 
12 MHz currently allocated for data and reserve channels). This 
``shared'' network would provide public safety access to additional 
spectrum resources when needed, and will also facilitate more efficient 
use of the public safety spectrum.
---------------------------------------------------------------------------
    \2\ See Further Notice of Proposed Rulemaking in WT Docket Nos. 06-
150, 06-169, 96-86, and PS Docket No. 06-229, FCC 07-72 (released Apr. 
27, 2007).
---------------------------------------------------------------------------
    Our support for such a public-private partnership flows from our 
realization that there is simply no other viable method to pay for a 
national broadband network that will meet public safety requirements. 
Some local agencies may have special access to the resources necessary 
to build a local or regional public safety broadband network of their 
own, as is being done here in Washington and in New York City. However, 
most agencies around the country will not have similar funding 
available to build their own broadband networks, and there is no way to 
pool funds beyond state or regional systems. The result will be widely 
dispersed networks covering mainly resource-rich jurisdictions, built 
to different standards on different portions of the radio spectrum, and 
with little or no interoperability.
    A national broadband network, in contrast, could provide for 
nationwide interoperability, substantial cost efficiencies, and more 
effective and efficient use of scarce radio spectrum. We believe that 
such a network can and must be designed to provide these benefits while 
also accommodating the varying needs and resources of local agencies. 
The biggest challenge, however, is to identify viable sources of 
funding.
    There are few potential funding options for a national public 
safety broadband network, most of which are simply unrealistic. One 
option that has been suggested is for the Federal Government to provide 
the tens of billions of dollars necessary to build a national network 
to serve state and local first responder agencies. While we would 
obviously welcome such Federal funding, we know how difficult that 
would be to achieve in the current budgetary environment. Such highly 
speculative and uncertain funding should not deter the FCC from taking 
advantage of this one-time opportunity to address our needs through its 
auction rules.
    Others have suggested that public safety agencies simply rely upon 
commercial networks to provide their broadband communications 
capability. However, commercial grade networks are not usually built to 
public safety specifications. Commercial networks will usually focus on 
densely populated areas, leaving out areas that public safety agencies 
need to reach. Commercial networks are also typically designed with 
higher potential outage rates than public safety can usually tolerate. 
Nor are commercial systems designed in most cases to withstand natural 
disasters to the same degree as a public safety systems. Public safety 
agencies also need substantial on-demand access to network capacity and 
user-specific functionalities (such as ``one-to-one'' and ``one-to-
many'' communications) that are difficult to meet on a commercial 
network. Moreover, the critical nature of public safety communications 
is such that agencies are reluctant to place too much dependence on a 
commercial enterprise that could terminate operations or reduce service 
quality at any time.
    The only viable option to fund a national public safety broadband 
network is to form a public-private partnership whereby spectrum 
resources can be shared among commercial and public safety users, but 
on a network that meets the requirements of first responder agencies 
and retains public safety control over public safety spectrum.
    This concept of a public-private partnership was introduced last 
year in a legislative proposal from Cyren Call Communications. While we 
would still welcome legislation to implement some form of that proposal 
(as it provided for direct public safety licensing of significant 
spectrum resources), we are now focusing on more limited proposals that 
are before the FCC and within its authority to implement.
    The FCC first addressed the potential for a public-private 
partnership last year in its Ninth Notice of Proposed Rulemaking in 
Docket 96-86 (``9th NPRM'') in which it proposed that a portion of the 
700 MHz band spectrum already allocated for public safety be assigned 
to a single national public safety licensee. Until now, all public 
safety radio systems have been built pursuant to licenses issued 
directly to state or local governments. The Commission explained in the 
9th NPRM that a national licensee (which would be a nonprofit entity 
representing the interests of public safety agencies) would be 
necessary for the successful development of a national public safety 
broadband network.
    We previously expressed significant reservations about the 9th NPRM 
proposal. While the national licensee would have the benefit of 
national spectrum resources, it would not have access to the initial 
funding necessary to deploy a national broadband network. Unlike 
traditional public safety licensees at the state and local level, this 
national licensee would lack the ability to raise funds through taxes 
or municipal bonds. Nor would the spectrum resources available to the 
national licensee be sufficient to attract a commercial partner, as the 
amount of spectrum allocated for public safety alone could not support 
both public safety's own needs and a viable commercial network, 
especially since any commercial use would necessarily be subject to 
ruthless preemption.
    Some have suggested that the national public safety licensee could 
simply issue a request for proposals (RFP) seeking a private partner to 
construct a public safety grade network on public safety spectrum. What 
happens, however, if nobody responds? In fact, that is a likely result 
as few commercial entities would have the ability or incentive to build 
a nationwide system with the coverage, reliability, functionality and 
security that public safety requires. In any event, how would the 
national public safety licensee pay for such a network?
    It was with these fundamental constraints in mind that we have 
considered the innovative ``conditional auction'' approach that 
Frontline Wireless has proposed. This approach assumes that a block of 
spectrum will be auctioned with specific conditions, including a 
requirement that, subject to a ``network sharing agreement'' with a 
national public safety licensee, the auction winner will construct a 
broadband network that incorporates the public safety broadband 
spectrum and is built to satisfy public safety requirements. Through 
the national public safety licensee, the network will be available for 
public safety use on a priority basis. While some commercial use of the 
public safety spectrum may be allowed, it would be on a ``secondary'' 
basis subject to unconditional preemption. Importantly, the auctioned 
spectrum will also be available for public safety use when currently 
allocated public safety spectrum is insufficient.
    APCO and NPSTC have filed comments with the FCC explaining their 
support for a conditional auction approach, and specifying provisions 
necessary to ensure that public safety remains firmly in control of its 
own spectrum. A vital element of the conditional auction approach is a 
network sharing agreement between the auction winner and the national 
public safety licensee. We have urged that the agreement must be 
negotiated prior to the issuance of the license to the auction winner, 
and that public safety must not be forced into an unacceptable network 
sharing with a party selected solely by auction. The agreement must 
also address issues related to the design and functionality of the 
network, limitations on commercial access to public safety spectrum, 
terms and conditions of public safety access to commercial spectrum, 
protections in the event of business failure by the auction block 
licensee, and assurances that local public safety agency variations can 
be accommodated. To the extent possible, some of these issues should be 
address in the FCC's rules.
    Many national and local public safety organizations and agencies 
have indicated their support for a conditional auction approach and a 
national public safety broadband network. Some have raised concerns 
about certain aspects of the proposal, in particular whether local 
agencies will be able to deploy their own data communications systems 
(there are no changes proposed for the state/local licensing of 
``narrowband'' voice systems). We share those underlying concerns and 
have therefore recommended a band plan and procedures to protect local 
autonomy, especially for deployment of ``wideband'' public safety data 
systems in areas where the national broadband network may be slow to 
deploy. We have also been adamant that public safety representatives 
must have the final word when it comes to the design, deployment, and 
management of the national public safety broadband network. We have no 
interest in simply allowing a commercial entity to take over our public 
safety spectrum.
    Finally, because the FCC is necessarily moving at a vigorous pace, 
we have joined with other national public safety organizations to 
initiate the formation of a legal entity that could serve as the 
national public safety licensee if the FCC proceeds in that direction 
Our goal is to ensure that the national licensee will represent the 
interests of our Nation's first responder agencies. Thus, the entity 
now under formation is to be a nonprofit corporation, known as the 
Public Safety Spectrum Trust Corporation, and will be led by a board of 
directors consisting of individuals selected by the Nation's leading 
public safety organizations, each of which has extensive knowledge 
regarding public safety radios systems and spectrum management. There 
would also be an advisory committee consisting of a broad range of 
organizations that also have an interest in the form and direction of a 
national broadband public safety network. Thus, if the FCC adopts a 
conditional auction process that requires a national public safety 
licensee, the Public Safety Spectrum Trust Corporation would be 
positioned to serve in that capacity.
    Mr. Chairman, in conclusion, we believe that the FCC should adopt a 
conditional auction approach that requires the auction winner to build 
a broadband network that serves both public safety and commercial 
users, and is designed, built, and maintained to meet public safety 
requirements. I thank you again for the opportunity to appear before 
you today.

    The Chairman. I thank you very much.
    Mr. Barksdale?

           STATEMENT OF JAMES L. BARKSDALE, PARTNER, 
                    FRONTLINE WIRELESS, LLC

    Mr. Barksdale. Thank you, sir.
    Chairman Inouye, Vice Chairman Stevens, distinguished 
members of the Committee, thank you for the opportunity to 
address the vital issue of public safety communications and how 
the upcoming spectrum auction can solve this life-threatening 
problem.
    Thirty years ago, I helped, and was Chief Information 
Officer for, Federal Express Corporation when we developed the 
tracking and tracing system. It was both a wireless and 
wireline system that now reaches around the globe and is the 
envy of all, and copied by all of its competitors, tracking 
billions of packages a year. As Chief Operating Officer at 
Federal Express, I was responsible then for deploying that 
around the world, along with many other logistical networks.
    I then went to McCaw Cellular, then the largest 
independent, and became the largest, cellular carrier in the 
world, where I was President for 4 years. We sold that to AT&T.
    And then, in the mid 1990s, I went to a little startup at 
Silicon Valley. We called it Netscape. It revolutionized the 
Internet by creating a browser that let mere mortals use the 
Internet, creating the fastest-growing software company in 
history. We sold that company in 1999.
    And then, later, as I was trying to be in retirement, I 
happened to have been appointed by our Governor, Haley Barbour, 
in Mississippi, to chair the Governor's Commission for 
Rebuilding our Gulf Coast, where I became reembroiled in this 
subject of networks and how you pay for them. And I'll get to 
that.
    As you said, the Nation is coming to the end of a long road 
in the transition to digital television. It's vitally important 
that we do this correctly. The good news is that now some 60 
MHz of that spectrum can be used to address the vital needs of 
our country.
    I'm here today out of frustration and out of hope. The 
frustration comes from the fact that 6 years after 9/11, and 
nearly 2 years after Hurricane Katrina, we are no closer to 
giving our brave first responders the basic communications 
tools they need to save lives and respond to disasters in the 
vast majority of the United States. There are certainly some 
exceptions. One is on the panel here today, from New York.
    In the wake of Katrina, as I said, honored to serve as 
Chairman of Governor Haley Barbour's Commission on Recovery, 
Rebuilding, and Renewal in Mississippi, I understood the shared 
frustration among police officers, firefighters, and search-
and-rescue teams who were forced to use human runners to 
coordinate an emergency response to the largest natural 
disaster in our Nation's history. This frustration runs deep, 
because it was the same problem the Nation witnessed in the 
wake of the 9/11 disaster.
    But all problems bear the seeds of opportunity and hope. 
The hope comes because we have a tremendous opportunity to 
solve public safety's needs for a truly interoperable network. 
One of the key recommendations in my recovery report to the 
Governor was that Mississippi needs to build a statewide 
interoperable wireless network funded and developed through 
public/private partnerships. I would point out, Mississippi has 
now come up with such a network.
    I went to the State legislature for $250 million worth of 
bond issues. Didn't get passed. Marvelous network. Didn't get 
passed. Can't pay for it. These are the same taxpayers, now, 
who pay Federal taxes, who pay State taxes, who pay local 
taxes. Same people.
    Then, when I was introduced to the Frontline plan, which 
set out to solve these problems in the same fashion on a 
national scale, joining as a partner seemed like a no-brainer 
to me. The proposal put forth by our company would seem to me 
to culminate a lifetime of work on my part. Frontline Wireless 
is to finance a nationwide, interoperable broadband network 
that does not require legislation, does not need a $30 billion 
appropriation, and does not delay the upcoming auctions.
    After months of careful planning with leaders of public 
safety, I am pleased to report that we agree on many of the 
essential features of a proposal to solve public safety's 
needs. Specifically, we agree on: (1) the need for public/
private partnership; (2) the requirement of additional public 
safety spectrum during emergencies, obviously; (3) the need for 
public safety to have the private sector pay for the build-out 
of the network; (4) the importance of public safety having a 
national licensee to coordinate its spectrum; (5) the 
requirement to build a network with unprecedented coverage, 99 
percent of the U.S. population--99 percent of the U.S. 
population, including Alaska and Hawaii; (6) the need to 
protect public safety in the event of financial difficulty; (7) 
the ability of public safety to have ultimate say over whether 
this ``E Block'' network, as it's called, meets their needs; 
and (8) the importance of all bidders to understand that this 
network needs to be built to public safety standards.
    Though other issues remain, in my experience these 
questions can, and should, be resolved relatively quickly in 
further discussion between public safety and whoever wins the 
auction to become the ``E Block'' licensee, which certainly may 
not be Frontline.
    The upcoming 700 MHz auction marks an historic moment. If 
the FCC acts wisely, it can solve public safety's deadly 
deficit in interoperable and broadband communications. I'd like 
to commend Chairman Martin, of the FCC, and his fellow FCC 
Commissioners, for their remarkable flexibility and foresight 
in allowing our proposal to be heard in this late stage of the 
DTV transition.
    If the FCC adopts the right set of rules, then whichever 
company wins the auction, Frontline or someone else, the FCC 
can achieve, at no cost to taxpayers, the interoperable 
broadband network that public safety desperately needs. And, I 
submit to you, will never be built if we don't do it this way, 
because most states and local governments will find other 
things to do with the money. It's no accident that Washington, 
D.C. and New York City are the leaders in building these 
networks. They're the only ones doing it right now. They also 
happen, coincidentally, to be the two cities hit by 9/11. They 
fear the clear and present danger, which is what generally 
causes people to get off the tax bases and fund these things.
    The upcoming auction also has tremendous potential to 
foster competition and innovation in the broadband and wireless 
market, another thing desperately needed, as identified in this 
morning's Wall Street Journal right-hand major piece on why our 
current wireless system thwarts innovation and other uses for 
this vital national asset, why we're behind the rest of the 
world in these things.
    The truth is that the wireless industry is rapidly 
consolidating. The choice before the FCC is whether it should 
take all the spectrum being freed up by the DTV transition and 
hand it to the incumbents, who have every incentive to simply 
warehouse their spectrum, or whether it should take small part 
of it--we propose just 10 MHz--and use that spectrum to help 
public safety and also create a vitally needed platform for 
innovation and competition.
    The Commission can go a long way to lower the significant 
barriers to competition and innovation in wireless 
communications by designing the commercial side of the shared 
``E Block'' network for open access. That's what The Wall 
Street Journal is talking about today. A shared network, the 
Frontline proposal, would be open to all handsets and devices 
that do no harm to the network, the exact argument given in the 
Carterfone decision 40 years ago, to any kind of customer, from 
established retail providers to startups to device 
manufacturers to end-users, and to any of the kind of lawful 
content, whether streaming video, Voice over Internet Protocol, 
or the next big thing. The current wireless situation is not 
good for consumers, it's not good for innovators or the hope of 
creating a third pipe to the home.
    The FCC can adopt a modest proposal, on just 10 MHz, that 
will fundamentally change the current static environment in 
which America lags the world on wireless development and 
innovation. Who benefits from this requirement? The short 
answer: everybody. This requirement means that regional and 
rural wireless carriers and telephone companies eager to 
improve coverage in broadband for their customers will at last 
have a nationwide provider.
    In conclusion, we are long past the time to talk about what 
might happen, or should happen, or is going to happen for 
public safety. Any serious proposal must address how this 
costly network will be funded and built without relying on 
government funds which are not forthcoming, as was the case in 
Oregon, just mentioned.
    Frontline's plan is the only proposal to provide a clear 
funding mechanism that capitalizes on this crucial opportunity 
by incorporating a public/private partnership for public safety 
into the 700 MHz auction.
    Thank you all very much, and I'll look forward to your 
questions.
    [The prepared statement of Mr. Barksdale follows:]

          Prepared Statement of James L. Barksdale, Partner, 
                        Frontline Wireless, LLC
I. Introduction and Summary
    Chairman Inouye, Vice Chairman Stevens, and distinguished Members 
of the Committee, thank you for the opportunity to address the vital 
issue of public safety communications and how the upcoming radio 
spectrum auction can solve this life-threatening problem. I am a 
Partner in Frontline Wireless, LLC, which was founded by Haynes Griffin 
(CEO), Janice Obuchowski (Chairman), and Reed Hundt (Vice Chairman). I 
am pleased that Ram Shriram, who worked with me at Netscape and is now 
on Google's board, John Doerr, an accomplished Silicon Valley investor 
whose vision helped make companies like Netscape a reality, and Mark 
Fowler, Chairman of the FCC during the Reagan Administration, also have 
joined me as partners in Frontline. Together, we believe the upcoming 
700 megahertz auction presents a once-in-a-generation opportunity for 
building a nationwide, interoperable public safety network while also 
enhancing competition and innovation in wireless broadband. Haynes 
Griffin and I were there in the early days of cellular and we both know 
how to make wireless ventures work. I've known former FCC Chairman Reed 
Hundt for over fifteen years and most recently co-chaired with him a 
study group on the future of public broadcasting for PBS. And I'm 
delighted to be teamed up with Janice Obuchowski, who has played an 
important role in tackling public safety's needs as former head of the 
NTIA and U.S. Ambassador to the World Radiocommunication Conference.
    We as a Nation are coming to the end of a long road on the 
transition to digital television (``DTV''). This Committee has taken a 
leadership role in pushing our country forward to use the precious 
radio spectrum freed up by the DTV transition more efficiently, and to 
make that spectrum available for commercial and public safety use. The 
good news is that now some 60 megahertz of that spectrum can be used to 
address the vital needs of our country.
    I am here today out of frustration, and out of hope. The 
frustration comes from the fact that 6 years after 9/11 and nearly 2 
years after Hurricane Katrina, we are no closer to giving our brave 
first responders the basic communications tools they need to save lives 
and respond to disasters. In the wake of Katrina, I was honored to 
serve as Chair of Governor Haley Barbour's Commission on Recovery, 
Rebuilding and Renewal in Mississippi. Through a series of town hall 
meetings and conferences with government officials immediately in the 
wake of Katrina, our recovery commission developed a comprehensive list 
of recommendations for rebuilding the Gulf Coast and better preparing 
for future hurricanes in that region. My role on the commission exposed 
me to the shared frustration among police officers, firefighters and 
search and rescue teams who were forced to resort to using human 
runners in order to coordinate an emergency response to the largest 
natural disaster in our Nation's history. This frustration runs deep 
because it was the same problem--the same problem!--that the Nation 
witnessed in the wake of the 9/11 disaster.
    The hope comes because we as a Nation have a tremendous opportunity 
to solve public safety's needs for a truly interoperable network. The 
hope comes because for the first time there is a concrete proposal to 
finance a nationwide, interoperable, broadband network that does not 
require legislation, does not require a $30 billion appropriation from 
the Federal or state government, and does not delay the important 700 
megahertz auction. The hope comes from the fact that by working 
together--the public and private sectors--can solve the problem of 
public safety interoperability.
    After months of careful planning with leaders in the public safety 
community, I am pleased to tell this Committee that while we have not 
completely agreed on all details of how the Frontline wireless business 
can serve public safety, we agree on many of the essential features. I 
want to give you a real time update on what Frontline has discussed 
with representatives of the public safety community, which is a 
heterogeneous group of hundreds of different local and regional police, 
fire departments and other first responders. Working with their 
representatives and after spending hundreds of hours in meetings all 
around the country, we have a Plan that includes the features most 
important to that community, namely:

        1. in addition to the 24 megahertz of spectrum already set 
        aside for public safety, a sixth of the spectrum that will be 
        sold for commercial use at auction will be designated as an E 
        Block for both emergency and commercial service;

        2. the E Block will go to the highest bidder for that block of 
        spectrum;

        3. the FCC should create a national public safety licensee 
        (``NPSL'') to make various decisions on behalf of the larger 
        public safety community, including negotiation of a design and 
        spectrum sharing agreement with the E Block licensee;

        4. the license to use the E Block for commercial purposes will 
        carry certain conditions subsequent that must be performed in 
        an orderly fashion, including the duty to reach an agreement 
        with the NPSL about the design of the network so that it will 
        meet the specifications of the public safety community;

        5. in order to assure that the private sector builds for free a 
        network that can serve public safety all across the country, 
        the E Block license will carry the obligation to build a 
        network that covers at least 99 percent of the U.S. population;

        6. public safety will participate in the design and operation 
        of the network that will provide service across the E Block and 
        the public safety spectrum;

        7. local public safety agencies will have the right to build 
        interim public safety systems while the national shared network 
        is being constructed;

        8. only the E Block licensee will have the duty to negotiate 
        with the NPSL as to the terms discussed above;

        9. the NPSL will be free to decide whether it wants to work 
        with the E Block licensee or seek out a different spectrum 
        licensee or some other firm that lacks spectrum; and

        10. the network for the public safety should be interoperable 
        at the choice of public safety--if public safety users want to 
        connect to each other through this single national network they 
        can. For example, if different units need to work together to 
        respond to a crisis across jurisdictions, they can use the 
        Frontline network to communicate vital information to each 
        other in real time with high speed connectivity.

    We have not agreed on certain other provisions. For instance, 
Frontline does not believe that the FCC can delegate the selection of 
the auction winner to an outside party, as would happen if the FCC gave 
the right to the NPSL to veto issuance of the E Block license to the 
highest bidder in the auction. The E Block licensee should be bound by 
an FCC arbitration of any disputes arising from the negotiation of the 
network sharing agreement, and to charge the arbitrator with the duty 
to determine what is commercially and technically reasonable. While in 
my experience all these issues can and should be resolved relatively 
quickly in the negotiations between the NPSL and the E Block licensee, 
the help of this Committee, other Members of Congress and the FCC may 
well be helpful in achieving such resolution. Furthermore, some issues 
can well be resolved after the Commission reaches its conclusion on the 
service rules later this month.
    Overall, the good news is that Frontline and the public safety 
community appear to have reached a consensus that a public/private 
partnership should be part of the 700 megahertz auction. We also note 
with pleasure that the consensus is reflected in a recent resolution of 
the Southern Governors' Association, which urged the FCC to ``apply 
specific public safety requirements to at least 10 MHz of the spectrum 
currently scheduled to be auctioned.'' The State of Hawaii has perhaps 
stated it best: ``the Frontline proposal seems to be an excellent 
compromise between various proposals for Commercial/Public Safety 
sharing of broadband resources.''
    The upcoming 700 megahertz auction marks an historic moment. If the 
FCC acts wisely, it can solve public safety's deadly deficit in 
interoperable and broadband communications. If it adopts the right set 
of rules, it can achieve, at no cost to taxpayers, the interoperable 
broadband network that has yet to be delivered after 9/11 and after 
Katrina. Think about it: fire fighters rushing into a burning building 
could access a video feed of the inside and share that with the rescue 
squad as they plan how to save lives--without worrying if their 
wireless devices were compatible. The FCC also can use this historic 
opportunity to infuse the broadband market with a much-needed dose of 
competition. This hope of finally addressing public safety's needs will 
not be met, in my opinion, if the FCC simply decides to turn this 
spectrum over to the national incumbent carriers, who have shown little 
desire to respond to public safety's dire needs.
    Working with the public safety community, high-tech companies and 
public interest organizations, Frontline has put before the FCC a 
proposal that would require the winner of one slice of the upcoming 700 
MHz auction to build a network that would serve public safety's needs 
as well as its commercial customers. If the FCC adopts this proposal, 
whichever company--whether Frontline or someone else--wins this 
spectrum, it will build for free a nationwide, interoperable broadband 
network designed to serve public safety while covering an unprecedented 
99 percent of Americans.
    The proposal is made economically viable because, outside of 
critical emergencies, the winning bidder of the E Block will be able to 
make efficient use of unused capacity on the public safety spectrum. 
But when an emergency results in high-capacity demands by public safety 
officials, they will get immediate access to additional spectrum on the 
commercial system. Before running Netscape, I was President and COO of 
McCaw Cellular, and built that system into a nationwide network before 
selling it to AT&T. I know what it takes to build and operate a network 
that meets customers' needs. The Frontline Plan represents the best in 
public/private partnerships. It uses the private sector to solve a 
crucial public need while generating the revenues necessary to attract 
private capital.
    The 700 MHz auction also has tremendous potential to foster 
competition and innovation in the broadband and wireless market, which 
is rapidly consolidating. The choice before the Commission is whether 
it should take all the spectrum being freed-up by the DTV transition 
and turn it over to the major incumbents, who have every incentive to 
simply warehouse their spectrum; or whether it should take a small part 
of it--we propose just 10 MHz--and use that spectrum to help public 
safety and create a vitally needed platform for innovation and 
competition. The Commission can go a long way to lower the significant 
barriers to competition and innovation in wireless communications by 
designating the commercial side of the shared E Block network for sale 
of services to all comers on what is effectively a common carrier 
basis. We propose, and have asked the FCC to require, the E Block 
licensee to build a new network with advanced fourth generation 
capabilities and to sell this network capacity on an open basis. To me, 
``open'' means the following:

   open to all customers, whether end-users, device makers, or 
        other service providers;

   open to all communications protocols to the degree 
        technically feasible, and with our software-defined radio plans 
        Frontline intends to advance the limits of technical 
        feasibility beyond anything seen to date in America;

   open to all lawful content, meaning we will not discriminate 
        against music or software just because we do not own or control 
        it;

   open to as many combinations of spectrum as are technically 
        and commercially reasonable, meaning that our customers can use 
        Frontline spectrum as well as any spectrum they may own, just 
        as public safety will we hope agree to use its spectrum in 
        conjunction with us.

    Although the E Block represents only one-sixth of the spectrum to 
be auctioned, it will create a nationwide broadband license holder 
fully motivated to sell wireless network services to, among others: (a) 
regional wireless providers until now prevented from offering a 
nationwide service, (b) rural wireline providers seeking efficient ways 
to deliver to their customers the same high-speed broadband options 
available in urban and suburban communities, (c) public utility 
companies in need of secure and robust wireless communications, (d) 
companies needing additional capacity to offer a ``third pipe'' into 
the home, and (e) manufacturers of new mobile devices. This business 
approach overcomes the rational but unhealthy incentive of today's 
vertically integrated wireless incumbents to refuse such access 
whenever it could compete with their own (or their wireline 
affiliates') myriad retail offerings. This point is developed further 
in the attached white paper by our distinguished economists from 
Stanford University.
    This Committee should encourage the FCC to take the right steps to 
put America on a new path, one that delivers to public safety an 
interoperable network and to consumers multiple choices for broadband 
service. The large wireless incumbents with an economic interest in the 
status quo are loudly stating that public safety ``has enough 
spectrum.'' That is not true. As our experience during 9/11 and 
Hurricane Katrina clearly demonstrated, public safety needs more 
spectrum in times of emergencies, and even Sprint Nextel, a national 
wireless carrier, stated that in testimony last month. I firmly agree 
with the Hawaii Firefighters Association, which has supported the 
essential elements of the Frontline Plan, when they told the Commission 
that ``[t]hose who would rather keep the entire 700 MHz block for their 
own corporate interests are not focused on doing what is right for 
public safety.''
    It is completely unrealistic to expect, as the incumbents seem to, 
that public money will pay for a nationwide build-out. Verizon, for 
example, has stated again and again that the ``majority of funds'' for 
a multibillion dollar public safety broadband network--estimated to be 
in the range of $15 billion--must ``come from public sources.'' That is 
not going to happen. It did not happen after 9/11, nor after Katrina, 
and it is not going to happen now. You know that. Public safety knows 
that. And we know that.
    Even worse, Verizon and others who expect taxpayers to pony up for 
this build-out miss the key point about taxpayer funds. Taxpayers pay 
taxes locally, and to their states and at the Federal level. Wherever 
taxed, they have to support public safety services. The Federal 
Government can provide a great boon to taxpayers everywhere by 
requiring the E Block licensee to build-out for public safety's benefit 
by using its commercial business to fund that network. Then, taxpayers 
will know that their funds for public safety can go to hiring more cops 
on the beat, more fire engines, better equipment for first responders, 
and choice of any devices for first responders, because the shared 
network will be open to any and all equipment. Taxpayers will know 
their money was not wasted, as Verizon suggests, on funding a $64 
billion network that Frontline was willing to build at no cost to the 
taxpayer.
    This national, interoperable network will serve a diverse group of 
public safety users, including local fire and police departments, 
county sheriffs, emergency managers, highway patrol, and 
municipalities. After building a new wireless broadband network 
according to specifications agreed upon by the NPSL, the new E Block 
network would be available to each and every public safety entity 
across the country. Verizon and AT&T, in contrast, do not propose to 
build anything new or even negotiate with public safety about 
redesigning commercial networks to make them feasible for public safety 
use.
    Another area of great importance to public safety is the scope of 
coverage. The Washington, D.C. area is fortunate enough to be able to 
afford an interoperable system. The same is true for New York City and 
parts of Mississippi. But this is a big country, and you well know that 
those build-outs simply will not happen in all parts of West Virginia 
or South Carolina or Minnesota or North Dakota or almost any other 
state in the country. The large national carriers tell public safety 
they should just rely on the wireless retail carriers' spotty 
commercial networks. In fact, they have not announced any plans to use 
the 700 MHz spectrum to expand the coverage or reliability of those 
networks to serve public safety's higher standards. Verizon has told 
the Commission that if it adopts any coverage requirements (and 
Verizon, of course, opposes any requirement to make productive use of a 
700 MHz license), the FCC should let carriers leave 25 percent of the 
public without coverage. Which one-fourth of America would they leave 
behind?
    We are long past the time to talk about what might happen or should 
happen for public safety. Any serious proposal must address how this 
costly network will be funded and built without relying on government 
funds. Frontline's plan is the only proposal to provide a clear funding 
mechanism that capitalizes on this crucial opportunity by incorporating 
a public/private partnership for public safety into the 700 megahertz 
auction.
II. We Must Fix Our Failing Public Safety Communications Systems
    This Committee has rightly recognized that the public safety 
communications systems in this country have reached the point of 
crisis. As Chairman Inouye recently urged, ``Congress must act quickly 
to give our first responders the tools they need to effectively do 
their jobs.'' \1\ Frontline agrees with the Chairman that we owe our 
first responders nothing less than the most modern, most reliable, most 
interoperable, and most flexible communications system available.
---------------------------------------------------------------------------
    \1\ Press Release, Chairmen Inouye and Stevens Introduce Measure to 
Improve Emergency Communications, Jan. 24, 2007 (quoting Chairman 
Inouye).
---------------------------------------------------------------------------
    We have seen the results of communications failures all too 
clearly, most notably on September 11. Thomas Kean, Co-Chair of the 9/
11 Commission, has stated bluntly, ``On September 11, people died 
because police officers couldn't talk to firemen.'' The 9/11 Commission 
Report elaborated, providing examples of how the lack of interoperable 
radio frequencies between police and fire department officials hindered 
evacuation efforts:

        At 9:00, the [police department] commanding officer of the 
        World Trade Center ordered an evacuation of all civilians in 
        the World Trade Center complex. . . . This order was given over 
        World Trade Center police radio channel W, which could not be 
        heard by the deputy fire safety director in the South Tower.

    As we now know, the South Tower collapsed an hour after this 
unheard evacuation order was issued.
    Four years later, the failures of our public safety communications 
networks were again on display during Hurricanes Katrina and Rita. Even 
though our first responders once again showed selfless courage and 
determination, the communications systems they relied upon failed both 
them and the public. It is clear that Vice Chairman Stevens was right 
when he commented shortly after those disasters that they ``have shown 
that many first responders just cannot talk with one another because 
their radios and communications networks have been inoperable.'' \2\ An 
independent panel appointed by the FCC also documented some of the more 
disturbing examples of these communications breakdowns:
---------------------------------------------------------------------------
    \2\ Hearing on Interoperability, 109th Cong. (2005) (Statement of 
Senator Stevens).

        [C]ommunications between the military and first responders also 
        appeared to suffer from lack of interoperability. In some 
        cases, the military was reduced to using human runners to 
        physically carry messages between deployed units and first 
        responders. In another case, a military helicopter had to drop 
        a message in a bottle to warn first responders about a 
---------------------------------------------------------------------------
        dangerous gas leak.

    While we have made important progress in some areas, the truth is 
that our public safety communications systems--and thus the American 
public--will remain highly vulnerable as long as the networks continue 
to rely on yesterday's technology. As the Washington State Council of 
Firefighters told the FCC earlier this month: ``We do not have 
sufficient spectrum and we do not have operable communications, let 
alone interoperable communications. As a Nation we have stood by for 
too long as our communications system time and again failed our 
Nation's first responders.'' This is unacceptable. The patience of 
Congress and the American public is wearing thin. The time has come to 
ensure that the public safety community has the 21st century 
communications systems it needs and deserves. This can happen if the 
FCC, with encouragement from Congress, designs the upcoming 700 MHz 
auction to ensure the creation of a nationwide, interoperable broadband 
network, as proposed by Frontline.
III. The Frontline Plan Provides the Answer--a Nationwide, 
        Interoperable Network Built and Paid for by a Robust Public-
        Private Partnership
    Public safety officials have clearly stated what they need to cure 
these communications deficiencies: a nationwide, interoperable network. 
This type of network--with the reliable, secure, diverse capabilities 
it enables--is the single best way to improve and modernize public 
safety communications systems. For this reason, the FCC recently 
designated half of the public safety spectrum set aside by Congress in 
the 700 MHz band for broadband use, which is key to IP-based 
interoperability. Interoperability means that persons from different 
parts of the public safety community can talk or exchange information 
with one another. But a rule that the network, if built, shall be 
nationwide and interoperable is only the first step. As I said at the 
outset, I am pleased to report to the Committee on the substantial 
areas of common ground that we have with public safety going into the 
700 MHz auction. Thus, the Frontline Plan proposes service and auction 
rules to ensure that: (1) the public/private partnership will construct 
the public safety nationwide network with private sector capital, (2) 
the public safety network will have access to additional spectrum in 
times of emergency, (3) the network will be built to standards for 
coverage, security and local control that are worked out with public 
safety, and (4) public safety will maintain control over the spectrum 
allocated to it by Congress.
A. Funding a Multibillion Dollar Network
    The reality public safety confronts is that a nationwide broadband 
network will be costly to construct, and the funds must be generated 
up-front. These up-front costs could easily exceed $15 billion. Thus, 
while the laudable appropriation of $1 billion from auction proceeds 
will improve public safety communications for many agencies, it cannot 
be relied upon to construct the nationwide network that will be key to 
solving the interoperability crisis. Given the obstacles that this 
Committee faced (and overcame) simply in making that $1 billion 
appropriation a reality, it would be unrealistic to expect an 
appropriation of 15 times that amount in the near future. Nor should 
Congress be expected to do so when a public/private partnership can 
deliver the same or better results.
    Accordingly, Frontline's Plan proposes auction and service rules to 
ensure that the E Block licensee will fund the build-out of public 
safety's nationwide, interoperable broadband network--built to a public 
safety grade of service--at no upfront cost to public safety or 
taxpayers. That is, the Frontline Plan would require the winning bidder 
of the E Block, whoever that may be, to build out a network for the 
public safety community and make commercial spectrum available to 
public safety in times of emergency. In return, the winning bidder 
would have preemptible access to the network capacity operating over 
the unused public safety spectrum, providing it with additional 
revenues to recoup its investment in the public safety network. There 
is nothing novel, let alone problematic, about the Commission's 
requiring the E Block licensee to use the public's spectrum resource to 
the public's interest. The FCC, as required by Congress, routinely does 
so for satellite and broadcast licenses. Indeed, Congress and the FCC 
have often required private license holders to assist public safety by, 
for example, imposing emergency warning system requirements on 
broadcasters and 9-1-1 requirements on cellular systems.
    Thus, Frontline's Plan maximizes use of spectrum for public safety 
and commercial uses, makes available extra spectrum in emergency 
situations, and builds the network for free in state-of-the-art, 4G, 
IP-level configuration. If the FCC takes the right step and adopts the 
Frontline Plan, it will solve public safety's funding problem by 
ensuring that the broadband network infrastructure is built with 
private capital with public safety only paying for service. It will 
relieve public safety agencies of both the construction costs and the 
time-consuming and difficult task of securing investment.
    Considering the crucial importance of a broadband public safety 
network and the lack of sufficient funding in the public sector, 
Congress and the FCC must disregard calls by the incumbent retail 
carriers to wait for massive government grants. AT&T, for example, 
argues that because a select few large cities have built broadband 
networks, every other town and county can be left to sink or swim on 
its own--ignoring the lack of sufficient financial resources that many 
communities face. As the Association for Public-Safety Communications 
Officials (``APCO'') explained in roundly denouncing such hollow 
arguments:

        APCO rejects suggestions by some in the wireless industry that 
        public safety's broadband needs can be addressed within current 
        public safety spectrum and that there is no need for 
        conditional auctions. What these and other parties ignore is 
        that public safety alone cannot afford to build a broadband 
        network.

    In addition to suggesting that the Federal Government fund the 
creation of the public safety network, Verizon and AT&T have also 
advocated a ``go it alone'' approach for public safety that relies upon 
a hope that some retail party may some day decide to create the network 
if the price is right. In other words, Verizon and AT&T would ``help'' 
public safety if the U.S. Government paid them $15 billion to do so. 
Congress and the FCC have before them the one and only opportunity to 
bring about a newly built fourth-generation network on spectrum 
adjacent to public safety's spectrum. Relying on incumbents to use 
existing retail networks to provide public safety with the necessary 
services would leave public safety with old technology on commercial 
grade networks. Only a new entrant has the incentive to build a public-
safety grade network, and only a new network can offer these fourth-
generation services, not only to consumers but also to public safety.
B. Access to Sufficient Spectrum in Times of Emergency
    Public safety must have access to sufficient spectrum for emergency 
operations, when a public safety network is most necessary and its 
communications resources most tested. While Congress provided the 
foundational block of spectrum for public safety 10 years ago, the half 
of that block that can be dedicated to broadband use--10 MHz exclusive 
of guard bands--is not sufficient to sustain a nationwide broadband 
network. As the National Public Safety Telecommunications Council 
(``NPSTC'') has noted, ``assertions that public safety has adequate 
spectrum are insulated from the reality facing the Nation's emergency 
services.'' \3\ The State of California echoed this finding and stated 
that it does not believe this to be ``an adequate amount of spectrum to 
handle the expected load.'' \4\
---------------------------------------------------------------------------
    \3\ Reply Comments of NPSTC, Implementing a Nationwide, Broadband, 
Interoperable Public Safety Network in the 700 MHz Band, PS Docket No. 
06-229, at 3 (Mar. 12, 2007) (``NPSTC Reply Comments'').
    \4\ Comments of the State of California, Implementing a Nationwide, 
Broadband, Interoperable Public Safety Network in the 700 MHz Band, PS 
Docket No. 06-229, at 2 (Feb. 26, 2007).
---------------------------------------------------------------------------
    Frontline's Plan addresses the clear need for additional spectrum 
by more than doubling the amount of peak broadband spectrum capacity 
available to public safety communications under emergency 
circumstances. It does so by requiring the adjacent, commercial E Block 
licensee to provide priority access to public safety broadband 
operations on its own commercial spectrum during emergencies. 
Consequently, under Frontline's Plan, not only would public safety 
services have the highest priority access to network capacity operating 
on the 10 MHz of broadband spectrum allocated to public safety, but 
when necessary it also would have priority access to the E Block's 
additional 10 MHz or more of network service capacity. This network 
capacity will save lives in times of emergency by allowing police, 
firefighters and other public safety officials and agencies to 
effectively communicate with one another whether the interoperable 
communication occurs within the same small town or from Hawaii to 
Massachusetts.
    Although public safety must have access to far more than 10 MHz 
during emergencies, it will not fully use its own allocated spectrum 
day-in and day-out and all hours of the day. Thus, Frontline's Plan 
also makes the most efficient use of spectrum in non-emergency times by 
allowing the E Block commercial licensee to sell valuable network 
capacity over the unused public safety spectrum. As the FCC has 
recognized, commercial use of public safety spectrum on a secondary 
basis is a viable option. This secondary commercial access will in no 
way disrupt public safety services, which will always have automatic, 
instantaneous and unquestioned priority over commercial users with 
respect to the full capacity of the 20 MHz or more shared network. The 
beauty of an IP-based network is that such prioritization occurs 
without ``kicking off'' the commercial users, as occurs today in the 
cellular and PCS Wireless Priority Service. Instead, when there is 
congestion, the public safety traffic is prioritized, and simply moves 
to the head of the line and is delivered to its destination prior to 
the commercial traffic. At its simplest level, this is like an 
emergency lane for a fire truck. Meanwhile, commercial traffic is not 
barred. It is just not given priority. Public safety emergency calls 
will always get through, and commercial users may have to wait their 
turn. The same thing happens when cars are obliged to pull over to let 
an ambulance through on a busy street.
    Notably, the parties that have opposed the auction and service 
rules proposed by Frontline have themselves failed to propose 
alternatives for solving public safety's spectrum shortfall--just as 
they have failed to address its funding shortfall, as described above. 
Throughout the course of this proceeding, the largest retail carriers 
have maintained that public safety ``has enough'' spectrum and the 
Commission should ignore public safety's need for more. Indeed, despite 
clear evidence to the contrary that has been presented by leaders in 
the public safety community, as recently as last week AT&T told the FCC 
that ``additional spectrum is not needed by public safety at this 
time.'' Public safety and Frontline both strongly disagree. Frontline's 
Plan remains the only viable solution to the capacity crunch faced by 
public safety.
C. Building to Public Safety Grade Coverage
    The public safety community has made clear that a commercial grade 
network, built merely to serve population centers and immediately 
surrounding areas, will fall far short of public safety standards. 
NPSTC stated that ``public safety needs a reliable system that has the 
best possible coverage. It is not enough to have coverage that merely 
mirrors traditional cellular coverage.'' \5\ Based on the needs 
expressed by public safety, Frontline's proposed rules would require 
that the nationwide, interoperable, broadband network be built to cover 
99 percent of the population within 10 years, with interim milestones 
of 75 percent of the population within 4 years and 95 percent within 7 
years. Frontline's proposal for a very high, population-based coverage 
requirement serves the essential goal of a public safety network in not 
merely reaching population centers, but also more sparsely populated 
areas. Emergencies can and do occur in outlying towns and rural areas, 
just as they do in urban centers.
---------------------------------------------------------------------------
    \5\ NPSTC Reply Comments at 12.
---------------------------------------------------------------------------
    In contrast, the entrenched retail carriers, reflecting their 
equally entrenched business plans that leave little room for innovative 
public/private partnerships, have steadfastly opposed any buildout 
requirement for the E Block or, for that matter, other 700 MHz 
spectrum. Verizon begrudgingly has stated that if the FCC imposes a 
buildout requirement, there should be a carveout of at least twenty-
five percent of the population that the licensee could leave completely 
without service. Such proposals should highlight to this Committee the 
danger of leaving the future of public safety communications in the 
hands of the retail incumbents.
D. Preserving Public Safety's Control Over the Spectrum Allocated to It
    The Frontline Plan also provides for the public safety community's 
full and meaningful participation in administering the nationwide 
shared public safety network through the NPSL. Relatedly, it guarantees 
that public safety will maintain control over the spectrum allocated to 
it by Congress.
    Frontline strongly agrees with leading public safety advocates that 
the public safety community agree upon and publish a ``Statement of 
Requirements'' as soon as possible, and hopefully within 30 days after 
the FCC's decision on the service rules. This Statement of Requirements 
would spell out key service requirements such as performance objectives 
that would inform the architecture of the shared public/private network 
while leaving details such as specific technology and service decisions 
to a later network sharing agreement. Issuance of the Statement of 
Requirements will ensure that all bidders for the E Block license will 
be fully aware of public safety's needs prior to bidding on the 
spectrum. Frontline has also encouraged the FCC to incorporate as many 
of these requirements into the final rules as appropriate with enough 
lead time for bidders to take them into account. This also will help to 
prevent disputes after the auction. Furthermore the E Block licensee 
should begin to negotiate the details of the network sharing 
arrangement as soon as the auction is over, and aim to resolve that 
negotiation with the NPSL within 6 months at most. In the unlikely 
event negotiation was not successful, the E Block licensee would be 
bound by an arbitrator's conclusion as to what is a commercially and 
technically reasonable network design.
    The FCC will not be able to adopt rules that address all potential 
facets of the shared public/private network relationship, since some 
details will need to be worked out by the NPSL and the winning E Block 
bidder after the auction is concluded. The resulting network sharing 
agreement will determine the design and features of the shared network 
between the E Block licensee and the NPSL.
IV. The E Block Network's Commercial Capacity Should Be Made Available 
        to All Carriers and Network Users to Create a Platform for 
        Competition and Innovation
    At the same time that it makes Americans safer by improving public 
safety communications, the plan which Frontline and its supporters have 
put before the FCC will give new and existing smaller wireless 
companies a future in the increasingly consolidated wireless and 
broadband markets. The telecommunications marketplace has shown us that 
when markets are competitive, American consumers win. But the truth is 
that the wireless industry is not nearly as competitive as it was a few 
years ago, and as a consequence the two largest national carriers are 
discouraging innovation by high-tech entrepreneurs. Apple's iPhone is 
going on sale later this month, but if Steve Jobs wanted to reach 
critical mass of the population he really could only call two people to 
offer his phone, the head of Verizon or the head of AT&T, which control 
access to more than half of the market. We think that the innovators of 
new devices should be able to ask more than two people before launching 
an exciting new product. In fact, in an ideal world, they should have 
to call no one. That is the way it has worked on the telephone network 
for thirty years, and that system works well. All we're saying is that 
the FCC should dedicate a small part of the spectrum, the E Block, for 
a network to be offered to all innovators and competitors. Such a 
policy ensures that the wireless industry remains entrepreneurial and 
open to innovation by Silicon Valley and other high-tech companies. It 
also ensures that companies serving rural America will have at last a 
provider of network capacity eager and willing to offer service to 
enable these smaller carriers to offer their customers nationwide 
roaming.
    Verizon and AT&T, as rational incumbents, presumably want to buy 
the E Block and all the other spectrum to be sold in this last auction 
and then warehouse it. While that makes sense for them, it doesn't make 
sense for public safety or for the American people. The shared network 
that Frontline proposes will be open to competition and innovation in 
all the following ways:

   Open to all handsets and devices that do not harm the 
        network;

   Open to any kind of customer, from established retail 
        providers to startups to device manufacturers to end-users;

   Open to any kind of lawful content, whether streaming video, 
        VoIP, or the next big thing;

   Open to be used as a complement to any other network, 
        regardless of communications protocols to the degree 
        technically and commercially reasonable, especially including 
        other 700 MHz networks.

    The benefits of such openness will be many, but most notably will 
come in: (a) the lowering of barriers to entry in the wireless market; 
(b) a loosening of the tight controls that the wireless incumbents have 
held over the ability of online innovators to make new content and 
services available to consumers through wireless devices; and (c) a 
nationwide roaming provider for regional and rural wireless carriers 
eager to improve coverage for their consumers.
    Lowering of Barriers to Entry. The primary goal of Frontline's 
proposed commercial service rules is to promote competition by reducing 
barriers in the wireless market. With a facilities-based provider open 
to all kinds of customers, both new and existing retail providers will 
be freed from the often prohibitive costs of purchasing low-frequency 
spectrum and constructing wireless networks. As a result, these 
providers--currently under intense pressure to offer their customers 
nationwide roaming capability--will be able to compete in their local 
and regional markets against the huge national firms that have their 
own national networks that enable them to offer national roaming to all 
customers at no extra charge.
    It bears mention that Sprint Nextel currently provides roaming and 
other services to smaller carriers and so-called ``mobile virtual 
network operators.'' But the two largest carriers insist that they do 
not want to be obliged to provide roaming in the future to small local 
and regional carriers. And frankly they are entitled not to use their 
networks to enable their rivals to compete with them. We understand 
that. But precisely because that is their economic incentive, the FCC 
needs to address the problem of competition by requiring the E Block 
licensee to sell service to any and all buyers.
    Notably, parties who routinely struggle with such formidable 
barriers of entry have endorsed such openness for the E Block. A group 
of mid-sized wireline carriers consisting of Embarq, CenturyTel, and 
Citizens/Frontier--which each have a significant presence in rural 
communities--specifically described to the Commission the prohibitive 
costs of network build-out: ``Broadband deployment in rural areas is 
costly, in significant measure because of the challenges caused by low 
population densities, which make it difficult to aggregate the customer 
demand needed to justify large network investments.'' These companies 
added that there are no network operators who simply sell network 
services and do not choose to compete with their customers.
    These comments from mid-size and rural telephone companies 
demonstrate in concrete detail how and why a network that offers 
service to all parties can translate into greater broadband deployment, 
particularly in rural areas. In these areas, it is often economically 
irrational for providers to build state-of-the-art wireless broadband 
facilities. (As discussed above, it is this same incentive that makes 
existing retail networks poor options for public safety 
communications.) As a result, rural buildout is stymied. Frontline's 
service proposal provides a way around this economic reality by making 
rural wireless service cost-effective for retail service providers.
    The open service proposed for the E Block would also encourage and 
rely on market-based forces, rather than command-and-control 
regulation, to meet the concerns identified by companies like Embarq, 
CenturyTel, and Citizens/Frontier. Instead of relying on universal 
service support, Frontline's Plan addresses the critical problem of 
rural broadband deployment with private sector solutions that do not 
burden taxpayers. Further, a requirement that the E Block licensee sell 
service to anyone, end-users or other companies, will create market-
based incentives to complement buildout requirements, which Frontline 
supports.
    Consumer choice. Frontline's proposed open service rules are also 
intended to promote competition and innovation by ensuring that service 
providers (e.g., content companies, applications providers) can freely 
offer new wireless services to consumers without having to ask 
permission from Verizon or AT&T.
    Several high-tech innovators have confirmed the need for an open 
service network and provide examples of the benefits that such a 
network will bring to them and to the state of competition in the 
broader broadband market. Google, for instance, outlined its critical 
need for guaranteed access to its customers:

        The greater challenge [Google faces] is . . . universal 
        accessibility. Like other Internet-based companies, Google 
        relies on the communications infrastructure provided by 
        underlying carriers in order to reach our ultimate end-users. 
        In particular, in the United States, the telephone companies 
        and cable companies control the only means of broadband access 
        to Google's customers.

    I already mentioned another example, Apple's iPhone, which had to 
go through the gates marked AT&T or Verizon if it wanted to bring its 
exciting new product to market.
    Objections to a network that may not act as a gatekeeper between 
companies and consumers came, predictably, from those powerful 
incumbents whose retail businesses have the most to lose from 
competition and innovation. I want to highlight that this is a very 
modest proposal. We are not proposing to impose this open service 
requirement on all wireless providers. And we are not proposing to 
impose this requirement retroactively on incumbents. Rather, 
Frontline's open service proposal simply says on a prospective basis 
that a fraction of the 700 MHz spectrum should be made available as a 
platform for competition and innovation. We think that is a small 
investment that will pay huge dividends for the future of our 
information technology economy.
    Roaming. This Committee has long demonstrated leadership in 
bringing advanced telecommunications services to rural Americans, who 
deserve access to the same advanced services as their counterparts in 
urban centers. Frontline's proposed open service rules will further 
these goals. By definition, a network making service available to any 
buyer will serve as a nationwide roaming provider to regional and rural 
wireless carriers. The emergence of such a roaming provider would 
encourage wireless competition in rural areas by freeing existing 
competitors from the need to construct facilities or purchase access 
from entrenched national incumbents who offer competing retail 
services.
    Comments filed with the FCC in support of the Frontline Plan 
confirm the need for competitive roaming arrangements. Cellular South, 
for example, describes both the lack of existing competitive options 
for mid-sized carriers and its causes and consequences:

        Frontline's proposal would provide a much-needed broadband 
        roaming partner for small and regional wireless providers. 
        Today, small and regional carriers find it increasingly 
        difficult, if not outright impossible, to negotiate high-speed 
        data roaming agreements with national wireless providers. This 
        hurts the small carriers but, more importantly, it hurts the 
        rural consumer.

    The open service requirement will not only help ensure widespread 
and robust wireless service in rural areas, but will allow smaller and 
mid-sized carriers to ``go national,'' and offer additional competitive 
choices to American consumers. Without the ability to offer national 
service, these carriers cannot provide a competitive alternative to 
larger carriers' service.
          * * * * * * *
    Finally, in terms of who can bid on the E Block and thereby make 
this open service available to the marketplace, it is important to 
remember that when Congress adopted the law creating auctions in 1993, 
this Committee recognized that it would be bad policy if the spectrum 
simply went to large incumbents that have little incentive to innovate 
and bring new technologies to market. The Committee required that the 
FCC adopt policies to ensure that small businesses would have a chance 
to participate in the auctions by giving them bidding credits if they 
qualify. The FCC recently adopted rules that say these credits would 
not be available to an entity that leases or resells more than fifty 
percent of its bare spectrum capacity to entities. The E Block 
licensee, however, will not be leasing or reselling spectrum. Instead, 
it will be required to build facilities and construct a national 
network over which it will offer services. It will operate thousands of 
towers and radios and utilize this network as a facilities-based 
provider. Because these build-out requirements will apply to any E 
Block licensee (whether Frontline or anyone else), the leasing and 
resale restrictions are not relevant and the FCC should so clarify. 
Moreover, the licensee should sell network capacity to anyone including 
end-users. Under these circumstances, an entity is acting as a small 
business and, if it otherwise qualifies as a small business under the 
FCC's rules, should get the bidding credit established by Congress.
V. The Frontline Plan Ensures That the Commercial Network Will Sustain 
        the Public Safety Network
    AT&T and Verizon, in a naked effort to keep the E Block free of any 
obligation to serve public safety, have tried to say that the FCC 
should not adopt those obligations because the E Block licensee will 
not succeed as a business. Well, making money, particularly with a 
wireless business, happens to be a topic my partners and I know 
something about, so I want to offer a few comments. Of course, like any 
smart entrepreneur, we are keeping the details of our business model to 
ourselves, but it has been tested by sophisticated investors and is 
both viable and distinctive. The need for confidentiality is especially 
important going into a highly competitive auction. And we are working 
with Citigroup to arrange financing and additional investment as we 
look toward the upcoming auction and construction of the network.
    In general terms, I can say that we envision a wide range of 
potential customers for E Block network services. Of course, we all 
know that public safety and the related critical private sector 
infrastructure segment is the most important group. But there are many 
others on the commercial side, and in fact it is these commercial uses 
that make the economics work for public safety. As any Wall Street 
analyst or high-tech player can attest, mobile Internet is the next 
growth frontier in the wireless industry and the potential is simply 
enormous. Just as the Internet supplanted voice as the growth engine in 
wireline telecommunications, the same will happen in wireless. At McCaw 
Cellular, we recognized early on the demand for ubiquitous mobile 
communications, and we built a multi-billion dollar business. At 
Netscape we recognized early on the power of the Internet and we built 
a multi-billion dollar business. Now I look to the future and see the 
intersection of these two markets and I expect to be able to build 
another multi-billion dollar business.
    The U.S. wireless market now has over 230 million voice 
subscribers, but only a small fraction of these have mobile Internet. 
Over the next decade, many if not most (and perhaps even all) of the 
people who now use cell phones will come to adopt mobile Internet. That 
is a huge, disruptive and exciting market opportunity.
    The business opportunity for the E Block winner will come from 
device makers such as Apple that want to launch a new product. Imagine 
going on vacation and using your camera--not a crude camera phone, but 
an honest-to-goodness camera--to take pictures and immediately send 
them to relatives through the air. You get the picture (so to speak). 
So it's easy to see how one could sell network connectivity not only to 
service providers but to device makers as well. Google could be a 
customer, if they want to test a mobile broadband service in a region 
of the country. Demand could come from a rural telephone company like 
Embarq, who wants to offer broadband service in high-cost areas, and 
``triple play'' mobility. It could come from Clearwire, who hopes to be 
the ``third pipe'' into the home and needs a complementary coverage 
network. It could come from smaller wireless carriers, like 
Mississippi's own Cellular South, eager to deliver customers a truly 
national service through roaming arrangements. Also, there are large 
enterprise customers who would like to buy wide area, coverage-rich 
connectivity. My former company FedEx comes to mind. What if FedEx 
could track every package in real-time across the entire United States? 
Not just at hubs or transaction points, but everywhere and for every 
package? Now extrapolate to the entire logistics sector. This is 
another big opportunity, and there are many more opportunities out 
there for a company, like Frontline, willing to take advantage of them. 
Demand for this service also could come directly from consumers, who do 
not like the idea of being locked in long-term contracts with expensive 
termination fees.
    In short, I see this as an exciting business opportunity for 
whatever company wins the E Block auction. That is why I think the E 
Block auction will attract many bidders. It offers the chance of 
becoming the wireless version of Level 3, which has built a strong 
business offering network capacity to a range of buyers.
          * * * * * * *
    The FCC will soon auction what is perhaps the most important piece 
of spectrum ever allocated by Congress, and it is expected to set the 
rules for that auction in the next month. It will be decades before 
such a large amount of versatile spectrum is auctioned again. Thus, it 
is critical that the FCC use this historic opportunity to improve our 
public safety communications systems and promote competition within the 
market. In my opinion, it would be a mistake to construct an auction 
that will solely serve the interests of the dominant national carriers. 
When the next emergency strikes, our communications systems must be a 
tool that saves lives rather than a source of confusion and tragedy.
    This Committee has overcome multiple obstacles over the past decade 
to bring the DTV transition to a successful conclusion so that our 
Nation's first responders can make urgent changes to the way they 
communicate. Now, all that remains between success and failure are a 
few, critical last steps which the FCC must take to finish the job. To 
make sure that happens, I respectfully urge the members of this 
Committee make clear their expectation that the FCC adopt the following 
elements for the upcoming 700 MHz auction:

   Meet the urgent need for a nationwide, public safety 
        wireless broadband network by providing that the E Block 
        licensee must construct that network and design it to public 
        safety grade specifications.

   Meet the needs of rural wireline carriers, smaller wireless 
        companies and online entrepreneurs to access low-frequency 
        networks by requiring the E Block licensee to offer network 
        services to commercial customers, including by offering roaming 
        to requesting carriers.

   Promote competition and innovation by ensuring that the E 
        Block's network service is offered without unreasonable 
        discrimination against particular types of services, 
        applications, and content.

   Clarify that the Designated Entity restrictions on lease or 
        resale of raw spectrum do not apply to the potential E Block 
        licensee given that it is required to construct its own 
        facilities and offer services upon them.

    In these first years of the 21st Century, you and I have too many 
times seen the devastating effects of communications failures. Given 
the stakes involved, I and my partners at Frontline hope this Committee 
will urge the Commission take the steps necessary to make this 
Committee's vision for public safety communications a reality. I thank 
you again for the opportunity to be here today.
                                 ______
                                 
    Economic Comments on the Design of the 700 MHz Spectrum Auction
        Peter Cramton, Andrzej Skrzypacz, and Robert Wilson \1\
---------------------------------------------------------------------------
    \1\ This paper was funded by Frontline Wireless, LLC. Curriculum 
vitae of Andrzej Skrzypacz and Robert Wilson were attached to our 
comments, ``Report of Andrzej Skrzypacz and Robert Wilson'' filed with 
Comments of Frontline Wireless, 23 May 2007.
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                              11 June 2007
1  Introduction
    Our previous submission in response to the Report and Order and 
Further Notice of Proposed Rule Making (FCC 07-72, 27 April 2007) 
presented economic analysis that supports Frontline's proposal that a 
national license for the E Block of the 700 MHz band should mandate 
open access. Open access means that

        1. wholesale contracting is transparent and nondiscriminatory, 
        and

        2. there is neither exclusion nor discrimination among devices 
        and communications that conform to the licensee's published 
        standards and operating protocols.

    The motivation is straightforward. Extending to the wireless sphere 
the huge gains to communication and commerce of the wireline Internet 
will greatly benefit the American public. The creation of the Wireless 
Internet requires an open network comparable to the wireline network 
that has made the Internet so beneficial. The 700 MHz auction is the 
Commission's main opportunity to give the public the full benefits of 
wireless services from competitive providers of digital telephony, 
Internet connections, and broadband.
    This paper extends the economic analysis by addressing claims from 
opponents of this open access proposal. We argue that the current state 
of the wireless market, and the potential for improving consumer 
welfare, justify the following conclusions:

   Open access for the E Block is necessary and will improve 
        the efficiency of the auction outcome. Further, it is essential 
        to address open access in this proceeding. The open-access and 
        wholesale provisions for the E Block are narrowly-tailored 
        remedies and fully consistent with the Commission's goals.

   There is an important market failure in auctions with 
        dominant incumbents. Auction rules that level the playing field 
        between incumbents and new entrants are necessary to assure 
        efficient assignment of the licenses. In particular, the 
        previous AWS auction of high-frequency spectrum was not 
        comparable to the upcoming 700 MHz auction of low-frequency 
        spectrum. If the AWS auction rules are used for the 700 MHz 
        auction then incumbents can block entry and consolidate their 
        dominant positions.

    In the next section we justify these conclusions in the context of 
our replies to others' comments.
2  Responses to Open Access Opponents' Claims
    This section explains why the points listed in the Introduction are 
true, contrary to claims made by some opponents of the open access 
proposal. It also explains why opposition serves the narrow interests 
of incumbents rather than the public welfare.
2.1  The open-access requirement on the E Block is necessary to obtain 
        an efficient auction outcome
    As we explained in detail in our previous comments, the wireless 
market is highly concentrated and on a path toward even greater 
concentration that could eventually justify antitrust actions. Indeed, 
the concentration level is well above levels that normally trigger 
antitrust scrutiny in merger situations were it not for the FCC's pre-
emption of regulation in communication industries. Such concentration 
can harm consumers in general, and it is especially noxious when 
incumbent firms can stifle innovative entry straightforwardly in 
auctions conducted by the FCC. Their exclusions of roaming and selected 
devices and communications could be interpreted as vertical 
foreclosure.
    Two firms, Verizon and AT&T, now control much of the access to the 
low-frequency spectrum in the 800 MHz range. Low-frequency spectrum is 
necessary for low-cost nationwide coverage and robust service. It 
allows these two firms to charge higher prices and yet have lower churn 
rates and a higher share of new subscriptions. The financial interests 
of these two companies are to exclude access by any provider of retail 
wireless services that might capture market share by competing against 
their own retail arms and dependent affiliates.
    The Wireless Internet can be a source of great benefits to 
customers. It will greatly improve the efficiency of the markets for 
communications services, which is the most important policy goal of the 
Commission. The benefits are likely to accrue mostly to consumers and 
reduce incumbents' profits. Therefore, the Commission cannot 
realistically hope that any incumbent will create the Wireless Internet 
on its own initiative. Hence the Commission must act in the interest of 
the consumers to designate the E Block for open access and to sell the 
right to build and operate it to the highest bidder.
    Consumer welfare has been enhanced by the introduction and 
expansion of mobile wireless services. But the absolute level of 
consumers' gain is not the appropriate metric--instead it should be 
measured against the gain in consumer welfare that is possible. The 
introduction of additional competition--competition engendered by an 
open access E block--can accelerate and magnify the gains in consumer 
welfare from wireless services. It is this opportunity that the 
Commission risks missing were it to allow the incumbents to forestall 
entry in the 700 MHz auction.
2.2  There is an important market failure in spectrum auctions with 
        dominant incumbents
    Some opponents of open access argue that selling a license with no 
restrictions to the highest bidder should result in the most efficient 
assignment of the spectrum.\2\ Subject to various qualifiers, this view 
can sometimes be a valid guide when all potential bidders are on equal 
footing. But it is severely wrong when some bidders are new entrants 
and some are incumbents motivated to protect their market shares.
---------------------------------------------------------------------------
    \2\ For example, see ``Comments of Verizon Wireless'' pages 51-53, 
or ``Reply Comments of AT&T Inc.'' Section IV.
---------------------------------------------------------------------------
    The reason is that entrants and incumbents have very different 
motives. A new entrant's incentive is to maximize its profits from the 
license alone, while an incumbent maximizes the sum of its profits from 
the combination of its existing licenses and new licenses. When its 
existing profits would be threatened by a new entrant, an incumbent is 
willing to pay more for a new license to prevent competition than any 
entrant would pay for the license.

   To gain market share, an entrant prices services on its 
        newly acquired spectrum to undercut the incumbents' prices. 
        Customers benefit from this downward pressure on prices due to 
        increased competition. To gain further market share, a new 
        entrant also wants to offer technical innovations valued by 
        customers.

   In contrast, an incumbent realizes that any competing 
        service offered on the new spectrum steals business from its 
        existing retail service plans. Hence it has muted incentives to 
        offer lower prices or new technologies that compete with its 
        existing offerings. To prevent losing business to new 
        competitors and being forced to reduce prices, an incumbent is 
        willing to pay a premium to acquire the spectrum--and the 
        larger its current market share, the larger is the premium it 
        is willing to pay. It is crucial to realize that under these 
        circumstances, even though an incumbent values winning the 
        license more than an entrant does, that additional valuation 
        does not represent true value added, but rather the incremental 
        value of thwarting competition from entrants.

    This is why allowing bidders with large market shares to compete on 
equal terms with entrants yields an allocation that is distorted away 
from an efficient allocation. Equal competition among unequal bidders 
is biased toward those with market shares to protect. The resulting 
allocation is inefficient in that it displaces entrants who could 
otherwise have invigorated competition and thus lowered prices to 
consumers.
2.3  Auction rules that level the field between incumbents and new 
        entrants are necessary to assure the most efficient assignment 
        of licenses
    To enable an efficient assignment of the new spectrum, the 
Commission cannot take a hands-off approach to the design of the 
service and auction rules. In the early spectrum auctions a spectrum 
cap prevented each cellular duopolist from obtaining additional 
licenses in its cellular regions. Comparable intervention is needed now 
to prevent the current low-frequency carriers from capturing the 700 
MHz spectrum to solidify their dominant positions. Because the spectrum 
cap that the FCC established before the PCS auctions was removed, the 
chief remaining instruments available now focus on exclusion of the 800 
MHz licensees and/or bidding credits for small businesses. Measures of 
this kind are necessary lest the 800 MHz duopoly is extended to the 700 
MHz spectrum to fully and permanently consolidate their dominance. By 
enabling entrants to compete effectively in the auction, bidding 
credits for small businesses encourage an assignment of the licenses 
that is more efficient and ultimately more beneficial to consumers.
    This conclusion accords with the argument for restrictions on the E 
Block license. Nondiscriminatory wholesale contracts for open access to 
the E Block licensee's network level the field for regional licensees 
and retailers who compete in retail markets with the retail arms of the 
incumbents' nationwide vertically integrated proprietary networks.
2.4  It is important to create the Wireless Internet now, not in 
        separate proceedings after the auction
    Some parties want the open access and Carterfone issues to be 
addressed in other proceedings, and thus they argue that Commission 
should not address them separately for this auction.\3\ We disagree: it 
is essential to address open access and other provisions of the E Block 
license in this proceeding.
---------------------------------------------------------------------------
    \3\ For example, see ``Reply Comments of CTIA--The Wireless 
Association'' (filed on 4 June 2007), Section V.
---------------------------------------------------------------------------
    The Commission cannot readily impose open access on selected 
licenses after the license assignment and the licenses' prices have 
been previously determined by an auction process conducted without the 
bidders' knowing the service rules that will ultimately prevail. A 
decision before the auction allows the two business models (open-access 
and proprietary vertically integrated networks) to compete in the 
auction and subsequently to co-exist and compete for customers. It is 
better policy to establish the licenses' specifications before the 
auction, to allow firms competing in the auction to assess their 
valuations without uncertainty about the future outcomes of additional 
proceedings.
2.5  The AWS auction is not an appropriate analogy for the upcoming 700 
        MHz auction, and it did not perform as well as some commenters 
        argue
    Dr. Hazlett in his paper ``Competition, Auction Receipts and 
Economic Welfare'' submitted on behalf of Verizon in response to the 
Notice states that the recent AWS auction attracted competitive bidding 
and no anticompetitive behavior by the incumbents. His supposition that 
there is an analogy between the AWS auction and the 700 MHz auction is 
incorrect. The AWS auction allocated very different spectrum--high-
frequency spectrum that is not economical for development of a robust 
nationwide network that could compete with the coverage of existing 
networks in the 800 MHz band. The AWS auction did not allow any entrant 
to challenge the position of AT&T and Verizon as the two leading firms 
with the requisite low-frequency spectrum that is necessary for 
developing nationwide products. Nor did it create a major threat to the 
duopoly rents that they earn from their exclusive holds on licenses for 
low-frequency spectrum.
    The situation is very different in the upcoming auction of 700 MHz 
spectrum. The 700 MHz auction is not ``just another auction''. It will 
assign spectrum with physical properties greatly superior to the PCS 
and AWS spectrum, and indeed, directly comparable to the incumbents' 
800 MHz spectrum. The 700 MHz auction is a unique opportunity to 
prevent entrenchment of the dominant positions of the current 
incumbents. The FCC should ensure that new entrants have a chance to 
pursue their business plans and that the ``incumbent bias'' of auctions 
described in Section 2.2 does not yield an inefficient allocation of 
this precious spectrum.
    Moreover, the view that the AWS auction was a boon for competition 
is not correct. In reality, the participation of one new entrant with a 
nationwide strategy was hampered by the auction rules. The DBS bidders 
dropped out of the auction when the total of the prices for nationwide 
coverage by aggregating smaller blocks was evidently well below their 
willingness to pay. We say this based on the DBS bidders' actual bids 
for large regional licenses, which might also have reflected discounts 
from their willingness to pay for nationwide coverage because of 
exposure risk (as we explained in our previous filing). It is 
impossible to say whether the DBS bidders would have been successful 
with different auction rules, but one can say that the AWS auction 
rules frustrated the participation of this potential nationwide 
entrant.
    Given that vastly more is at stake for AT&T and Verizon in the 
auction of the 700 MHz spectrum, it is clear that if the Commission 
does not level the playing field then these two firms will have both 
incentive and ability to discourage new competition in wireless markets 
at the national level.
2.6  The open access provisions for the E Block are narrowly tailored 
        remedies, fully consistent with the Commission's goals
    Some parties before the Commission argue that the open-access 
provisions are heavy-handed regulation and contrary to the Commission's 
goals. We disagree with both parts of this statement. Rather than being 
heavy-handed, the proposal asks for a modest restriction on a single 10 
MHz block out of the 78 MHz of spectrum licensed for commercial use in 
the 700 MHz band and no restrictions on the other low-frequency CMRS 
spectrum. This restriction is no more than minimally necessary to 
assure open access on nondiscriminatory terms. Without it America will 
likely never see open access.
    Any decision the Commission makes about the service and auction 
rules is ultimately a decision about the structure of the market for 
decades to come. Extreme concentration of the low-frequency spectrum in 
the hands of two firms sets the stage for continued domination by these 
two companies, unless the FCC takes action now.
    Imposing modest restrictions on the E Block license is much less 
intrusive than the two main alternatives: (a) endorsing continued 
domination of the low-frequency spectrum by Verizon and AT&T's 
vertically integrated proprietary networks, or (b) requiring open 
access on all spectrum by requiring mandatory roaming at regulated 
rates. The provisions of the E Block license are confined to the 
minimal requirements for open access on nondiscriminatory terms. This 
is the least intrusive of the ways the Commission can establish an 
infrastructure for wireless communication that is not controlled and 
manipulated by firms with a chokehold on nearly every aspect of 
America's digital technology.
    The Commission's goal is to allocate spectrum, a very scarce and 
valuable resource, to its highest and best use as measured by the 
public welfare. This outcome will not be achieved by selling the 700 
MHz spectrum without restrictions to the 800 MHz incumbents, whose high 
valuations stem from their incentives to protect their current profits 
by stifling competition rather than creating value added for the 
public.
    Lastly, we add that the effect on the Treasury's revenue of the E 
Block provisions is much less than the incumbents argue in their 
comments, and under some scenarios may generate higher bids. 
Establishment of the Wireless Internet will make all the regional 
licenses more valuable and hence it will increase the revenue from 
auctioning other blocks. Further, if the Commission chooses to take no 
action and adopts rules that perpetuate the incumbents' dominant 
positions, then the auction will likely be over before it starts--if 
potential bidders expect the incumbents to win then there will be 
little competition and low revenue for the Treasury. Evidence from many 
European countries has shown clearly that auction prices were much 
lower when incumbents could acquire all 3G licenses than when the 
auction rules guaranteed a level field for new entry.\4\ Given the 
dramatic evidence from Europe's sad experience, there is no excuse for 
repeating such a mistake in the upcoming auction of 700 MHz spectrum. 
Importantly, similar rules worked well in some countries' auctions and 
terribly in others' auctions--what did matter was the incumbents' 
ability in the auction to dwarf competition from potential entrants. 
The erroneous expectation that the same rules--closely comparable to 
those for the FCC's auction of PCS spectrum--will work well for many 
different auctions with differing competitive environments, was a major 
mistake in the designs used in Europe. In several countries the 
unexpectedly small revenues brought dismay at the relevant Treasury 
departments.
---------------------------------------------------------------------------
    \4\ See for example Paul Klemperer ``Auctions: Theory and 
Practice'' Chapter D, Princeton University Press, 2004.
---------------------------------------------------------------------------
3  Conclusion
    We see the Commission having three main alternatives: (a) do 
nothing and thus continue the dominance of the vertically integrated 
incumbents, (b) enforce open access on all spectrum by imposing service 
rules requiring nondiscriminatory terms for roaming on all spectrum, or 
(c) establish an open-access license on a slice of the 700 MHz spectrum 
to create room for both business structures to co-exist and to compete 
for customers on price, quality and variety.
    We stress that the last alternative is available only now, in the 
band plan, service rules, and auction design for the licenses to be 
sold in the upcoming auction of 700 MHz spectrum. It is also the 
propitious moment for extending to wireless services the advantages of 
the Internet. We believe that the dire situation implied by (a) and the 
heavy-handed intervention implied by (b) can be avoided with minimal 
intervention by the Commission. Applying pro-competitive open access 
rules to just a single slice of the 700 MHz spectrum leaves most of the 
spectrum available for other business plans. The E Block license 
provides the Nation a minimal public infrastructure for wireless 
communication, one comparable to the wireline Internet that has yielded 
vast benefits.
    If an open access license is not created then thereafter the FCC 
will be limited to forcing selected license owners to open access to 
retail entry. Doubtlessly the vertically integrated networks will offer 
solutions for many retail customers, but we emphasize that competition 
from new retail providers using the open access network will force 
incumbents to improve their services and lower prices.

    The Chairman. I thank you very much, Mr. Barksdale.
    Professor Weiser?

      STATEMENT OF PHILIP J. WEISER, PROFESSOR OF LAW AND 
   TELECOMMUNICATIONS, EXECUTIVE DIRECTOR, SILICON FLATIRONS 
                PROGRAM, UNIVERSITY OF COLORADO

    Mr. Weiser. Thank you, Chairman Inouye, Vice Chairman 
Stevens, members of this distinguished Committee. I appreciate 
the opportunity to testify here on a very important public 
policy issue, which is, how can this upcoming auction help 
facilitate the development of advanced technologies for use by 
public safety?
    My approach to this issue comes from my standpoint as 
Professor of Law and Telecommunications at the University of 
Colorado, where I also serve as the Executive Director of the 
Silicon Flatirons Program.
    More particularly, over the last year I've focused on this 
issue intensely, working on a report for the Aspen Institute, 
writing an article for the Federal Communications Commission 
Law Journal, and, most recently, convening a roundtable 
supported by CTIA, which published a report on this topic.
    Today, I testify on my own behalf, and the views are only 
mine. And I'm not here affiliated with any other entity.
    I want to underscore three basic points in my oral remarks 
today that are elaborated in my testimony, the only one, you'll 
note, with footnotes today, as appropriate for a professor.
    The main points I want to emphasize are the following:
    One is, there's an emerging new policy strategy that is far 
better than anything that has been done with public safety 
communications to date.
    Number two is, the lynchpin of this strategy is the idea of 
a public safety spectrum licensee, which can be very effective, 
with some safeguards that I'll note.
    And, number three, we should all appreciate how difficult 
the transition will be from the old model of public safety 
communications to a new one.
    So, let me quickly underscore this first point.
    There was an old model, where public safety agencies 
managed their own networks. They operated networks on a local 
level, buying highly specialized and expensive equipment to do 
so. The result, as has been emphasized quite a bit by members 
of this Committee, was non-interoperable and generally 
antiquated equipment used by public safety that is inferior to 
that available through commercial providers. Moreover, because 
public safety communications systems often are intermittent in 
their use--sometimes they're used intensely, and other times 
not at all--spectrum often went underutilized.
    In short, this old model left the agencies using antiquated 
equipment. It was difficult to facilitate interoperability, and 
it was at odds with spurring next-generation technologies. This 
new model, which can be facilitated by this upcoming auction 
and related policy initiatives, would allow public safety 
agencies to get cutting-edge technology and equipment that is 
as powerful as used by commercial sectors and the military. 
This new model will enable this new network to be adapted and 
to meet the requirements of public safety.
    So, rather than have spectrum dedicated only to public 
safety, public safety agencies can embrace an opportunity to 
share spectrum with a commercial partner, thereby enabling 
greater efficiencies and the buildout of a next-generation 
network.
    To spur this network, as I've mentioned, the FCC has wisely 
introduced--and I commend its leadership on this--the concept 
of a public safety spectrum licensee, which would control 12 
MHz of spectrum that could be used to develop this new advanced 
network. This policy innovation can bring great benefits to the 
public, to public safety, as long as the licensee can negotiate 
an effective framework with a commercial partner.
    And for this framework to be effective, it has to be able 
to adapt to changing circumstances as new requirements emerge, 
and it needs qualified advisors to help it come up with a 
framework that can protect its prerogatives and ensure that the 
partner follows through on its promises.
    Finally, I want to emphasize that, even with the right 
framework in place, this transition to a new technological 
architecture is going to be difficult. As Senator Sununu 
mentioned, this culture of public safety communications as 
operating a silo is deeply ingrained, and it's very important 
to bring local public safety agencies onboard with this new 
transition, where they'll operate virtual private networks 
along the lines of those used by corporate America.
    In any event, the development and deployment of a next-
generation network has to happen at higher levels. It's not 
going to happen effectively locally, and it's not going to 
happen if local agencies are unable to break out of the 
cultural mindset where they need to operate their own networks. 
Rather than operating and controlling their own networks, they 
need to become smart users of them.
    I know this is not going to happen overnight. It's going to 
take a lot of political leadership, continued attention from 
this Committee and the FCC, and I commend you all on this 
important work.
    Thank you.
    [The prepared statement of Mr. Weiser follows:]

     Prepared Statement of Philip J. Weiser, Professor of Law and 
  Telecommunications, Executive Director, Silicon Flatirons Program, 
                         University of Colorado
I. Introduction
    Thank you, Mr. Chairman, Senator Stevens, and Members of this 
Committee for the opportunity to testify on the important public policy 
challenge of ensuring that the upcoming 700 MHz auction and related 
policy initiatives facilitate the development and deployment of 
advanced communications technologies for use by public safety agencies. 
I approach this issue from the standpoint of my position as a Professor 
of Law and Telecommunications at the University of Colorado, where I 
also serve as the Executive Director of the Silicon Flatirons Program. 
More particularly, my testimony reflects my intense research focus on 
this issue over the past year, during which I authored a report for the 
Aspen Institute, wrote an article recently published in the Federal 
Communications Law Journal, and co-authored a report informed by a 
roundtable recently sponsored by CTIA--The Wireless Association.\1\ My 
testimony today, however, reflects solely my own views and any 
recommendations I offer should not be ascribed to any of the entities I 
have worked with on this issue.
---------------------------------------------------------------------------
    \1\ The Aspen Institute report, Clearing the Air: Convergence and 
the Safety Enterprise, can be found at http://www.aspeninstitute.org/
atf/cf/%7bDEB6F227-659B-4EC8-8F84-8DF23CA704F5
%7d/C&S%20FINALAIRSREP06.PDF. The article, Communicating During 
Emergencies: Toward Interoperability and Effective Information 
Management, 59 Fed. Comm. L.J. 547 (2007), can be found at http://
papers.ssrn.com/sol3/papers.cfm?abstract_id=980285. The CTIA-sponsored 
roundtable report, Toward A Next Generation Network for Public Safety 
Communications, can be found at http://www.silicon-flatirons.org/
conferences/Hatfieldt_Weisert_PublicSafety
Communications.pdf (hereinafter, ``Next Generation Network Report''). I 
have also co-authored a paper discussing the role of satellites in a 
next-generation architecture. See Phil Weiser et al, Toward A Next 
Generation Architecture For Public Safety Communications, available at 
http://papers.ssrn.com/sol3/papers.cfm?abstractt_id=903151. That 
earlier work emerged from a project undertaken on behalf of MSV. See 
Dale Hatfield & Phil Weiser, Toward A Next Generation Strategy, 
available at http://www.msvlp.com/newst_docs/papers/NextGenOct21R2.pdf.
---------------------------------------------------------------------------
    In my remarks today, I will focus on four themes that merit 
particular attention as this Committee and the Federal Communications 
Commission wrap up their important work related to public safety 
communications and the upcoming 700 MHz auction. First, I will discuss 
the need for a national public safety entity to manage a block of 
spectrum (i.e., ``a public safety spectrum licensee'') to promote the 
rollout of a wireless broadband network to support the use of advanced 
information and communications technologies by public safety. Second, I 
will address the concept of a shared public safety/commercial wireless 
network, explaining the powerful logic behind this proposal both with 
regard to enabling public safety agencies to use advanced technologies 
and in promoting spectral efficiency. Third, I will discuss the issues 
of governance and enforcement that must be addressed in order to make a 
public safety spectrum licensee model a success. Fourth, I will 
emphasize the importance of moving forward quickly with the auction, 
managing expectations, supporting ongoing innovation in this area, and 
not letting the perfect be the enemy of the good. In short, promoting 
the development and widespread deployment of an advanced communications 
infrastructure for use by public safety is critically important, 
difficult, and likely to take some time. Before I develop these themes, 
however, I will begin by detailing some important background 
information.
II. Background
    For many years, the development of communications infrastructure 
for public safety agencies remained largely an afterthought in 
telecommunications policy. This reflected the conventional wisdom that 
local public safety agencies should be assigned specific blocks of 
spectrum and use that spectrum to operate their own wireless 
telecommunications networks. This policy was arguably a sensible one 
when public safety agencies were among the relatively few established 
entities that operated wireless networks. Over the last several years, 
however, two distinct concerns have arisen as to the state of public 
safety communications: (1) different agencies cannot communicate with 
one another using their legacy equipment; and (2) advanced 
communications technologies increasingly being offered by commercial 
wireless providers are not available to public safety agencies. I will 
address each point in turn.
A. The Traditional Interoperability Concern
    The concerns related to the inability of public safety agencies to 
communicate with one another reflects the continuing lack of 
interoperability between many legacy public safety radio systems. In 
general, legacy radio systems are engineered to meet specific 
requirements articulated by public safety agencies--such as a very 
quick call setup time to enable communication during ``shoot-don't 
shoot'' situations, effective talk group functionality, and ``talk-
around'' capability. Radio systems manufactured to meet these 
specifications, however, are produced solely for public safety 
agencies, often rely on proprietary technology, and are generally quite 
expensive. Consequently, if one public safety agency adopts a 
particular system and another public safety agency adopts a different 
system, there often is no easy way for the two systems to communicate 
with one another. As you all appreciate, this lack of interoperability 
can be at best challenging (by making communication between different 
first responders difficult or impossible) or at worst tragic (as in the 
case of 9/11 when lives were lost because messages were not relayed 
between different agencies).
    The often touted solution for addressing the lack of 
interoperability between public safety radio systems is that all public 
safety agencies should purchase new equipment that can enable them to 
talk to one another. Under this strategy, local agencies would all 
purchase new equipment and operate that equipment using the same 
spectrum bands. Indeed, the Project 25 initiative rests on this vision, 
as it aimed to develop an open standard for digital trunked radio 
systems that would enable agencies to cooperate with one another, share 
spectrum between them, and, ideally, enjoy interoperable communications 
across jurisdictions. As a recent GAO report detailed, however, the 
Project 25 initiative has failed to deliver on its promise, largely 
because the relevant standards never facilitated a more competitive 
market in equipment.\2\ Stated simply, ``the Project 25 [initiative] 
made the mistake of treating public safety communications as a distinct 
island, giving rise to proprietary technologies that are not compatible 
with commercially developed (and far cheaper) alternatives.'' \3\ 
Finally, Project 25 radios are designed to support narrowband voice 
communications, but not broadband communications that can enable public 
safety agencies to gain access to useful information and communicate 
more effectively.
---------------------------------------------------------------------------
    \2\ U.S. Government Accountability Office, First Responders: Much 
Work Remains to Improve Communications Interoperability 3 (Apr. 2007), 
available at http://www.gao.gov/new.items/d07301.pdf [hereinafter GAO 
Report].
    \3\ Next Generation Network Report, supra note 1, at 36.
---------------------------------------------------------------------------
    A second interoperability solution is the use of gateways that use 
Internet Protocol technology to connect otherwise incompatible systems. 
Such gateway solutions are considerably cheaper than purchasing new 
Project 25 radios for a particular area, but they do not necessarily 
enable as effective or efficient communications as direct radio 
connections. Nonetheless, as a cost effective method of enabling 
different agencies to communicate at all (which is often what is 
needed), such solutions are quite promising and continue to improve in 
terms of their level of functionality.
    A third interoperability solution is for agencies to adopt new 
wireless broadband systems that enable them to use Internet-based 
communications (such as Voice over Internet Protocol) that can 
communicate directly to other agencies equipped with broadband systems 
or indirectly through gateways solutions (such as those described 
above). Unlike the Project 25 model, the purchase of wireless broadband 
systems is relatively inexpensive (as they rely on commercially 
marketed products) and can support an array of applications other than 
voice communications. Like the gateway solution, however, the use of 
interoperability at the Internet layer--i.e., Voice over IP 
connections--does not provide the same level of operability (at least 
using today's technology) as traditional dispatch systems. But again, 
in many situations, such as the often cited failings at the Columbine 
tragedy, 9/11, and the aftermath of Hurricane Katrina, the critical 
problem was an inability to communicate at all, not an inability to 
communicate at the required call setup times that public safety 
agencies sometimes need.
    The case for promoting wireless broadband and advanced information 
and communications technologies is not merely that it constitutes a 
potential interoperability solution. Rather, such technologies can 
enable public safety agencies to operate more efficiently and 
effectively. Indeed, such technologies are increasingly a source of 
important efficiencies in the hands of corporate America and the 
military--think of how FedEx tracks packages or how Walmart tracks its 
inventory--and there is every reason to believe that advanced 
information and communications technologies can empower public safety 
agencies in numerous ways. The challenge, however, is to develop a 
policy strategy to promote the development of a next-generation network 
for public safety agencies.
    Before I discuss the opportunities created by and the strategy 
necessary to develop next generation networks for public safety, let me 
emphasize two sobering points about the above discussion. First, it is 
important to appreciate that the need for short term interoperability 
solutions--such as the gateway model--will not disappear once we embark 
on the road toward a next generation network. Second, the next 
generation network will not, at least in the reasonably near term, 
function as a replacement for the traditional public safety dispatch 
systems. Rather, over at least the next decade (while a next generation 
network is developed, deployed, and proven out as sufficient to meet 
the requirements of public safety), it is likely that public safety 
agencies will need to support both their traditional dispatch systems 
and a next generation system. Among other things, this means that the 
funding needs of public safety agencies with respect to information and 
communications technologies are likely to increase in the near term.
B. A Next-Generation Network Architecture
    During my initial exposure to the issue of how to develop a next 
generation network for public safety, the conventional wisdom was that 
public safety agencies would never face up to a challenging cultural 
shift as to how public safety communications should operate. In 
particular, the prevailing wisdom was that public safety agencies would 
always insist on operating their own networks and would never accept an 
architecture that would call for the sharing of spectrum between public 
safety and commercial services. In my experience, however, a number of 
public safety officials have led the way in embracing the logic behind 
the move to a new technological architecture and a new policy strategy 
to deliver next generation network services to public safety agencies. 
For that progressive vision, I applaud their leadership and willingness 
to break from the old model.
    The increasing interest in a policy strategy to promote next 
generation networks for public safety reflects the realization that 
broadband networks are critical to the future of public safety 
communications and the services now available to corporate America 
should be adapted to meet their needs. As one public safety official 
put it, ``[n]ew public safety applications and capabilities involving 
broadband communications, IP technologies and flexible radios and 
spectrum sharing opportunities with commercial providers where 
appropriate are all in public safety's future.'' \4\ The public policy 
challenge is how to facilitate the emergence of this future.
---------------------------------------------------------------------------
    \4\ Testimony of Stephen T. Devine, Missouri State Highway Patrol, 
House Comm. on Energy and Commerce Subcomm. on Telecommunications and 
the Internet (Mar. 22, 2007).
---------------------------------------------------------------------------
    To spur the development of broadband networks, it is reasonably 
clear that the old model of networks operated and used solely by public 
safety agencies themselves is inefficient and unsustainable. That 
model, which was borne of necessity in an era where there were no 
suitable commercial wireless services, ignores a powerful case for 
using spectrum more efficiently. After all, public safety agencies use 
spectrum intensely at particular moments, but often use their spectrum 
on a limited basis. Consequently, the ability to share spectrum between 
a public safety entity and other customers can ensure that the network 
and spectrum is used more efficiently.
    On a practical level, it makes sense to develop and operate 
broadband infrastructure for public safety in concert with other 
providers. After all, we do not expect public safety agencies to 
manufacture their own uniforms or cars. As with uniforms and cars, it 
is not difficult to develop next generation technologies that can be 
adapted to the needs of public safety. The advantage of relying on 
commercial technologies is that public safety agencies will be able to 
benefit from commercial economies of scale and purchase equipment far 
more economically than they have been able to with respect to their 
traditional dispatch networks. Consider, for example, that ``a cell 
phone with voice, video, and data capability costs about seven times 
less than a public safety digital portable radio that cannot even take 
a digital photo, much less send it to another person.'' \5\
---------------------------------------------------------------------------
    \5\ Robert Rouleau, Connecting Data Networks, Public Safety Rep., 
Aug. 2006, at 98, 102.
---------------------------------------------------------------------------
    The bottom line in terms of the policy strategy for next generation 
networks for public safety is that the traditional approach for 
supporting public safety communications will not work effectively. 
Consequently, policymakers need to appreciate that our Nation's effort 
to develop next generation networks for public safety agencies will 
turn on our ability to spur a new model of governance, new cultural 
mindsets amongst the relevant stakeholders, and new funding models to 
support a new technological architecture. As I will emphasize in 
closing, these are difficult transitions and policymakers should both 
be vigilant in prodding them forward as well as understanding that they 
will not take place overnight.
III. The Importance of a National Public Safety Spectrum Licensee
    The Federal Communications Commission initially assumed that the 
traditional policy model would govern the use of the 700 MHz spectrum 
dedicated to public safety. In particular, the vision animating early 
discussions of how the spectrum would be used assumed that agencies 
would purchase new systems, such as Project 25 radios, and operate them 
at the same frequencies. Over the last several years, however, it has 
become clear that this solution is neither cost effective nor would it 
enable public safety agencies to use advanced broadband technologies. 
Indeed, this model is often associated with the ``narrowbanding'' 
concept that is antithetical to the development of broadband networks.
    Over the last year, the Federal Communications Commission has moved 
in a new direction. This new direction has made the Commission's work 
on the relevant rules for the soon-to-be assigned spectrum far more 
challenging, but I applaud Chairman Martin and his fellow Commissioners 
for their leadership on this issue. If, for example, the Commission 
carved up the entire 24 MHz of spectrum devoted to public safety into 
narrowband channels and distributed them to local agencies, it would 
have undermined the ability to use this spectrum for broadband. Instead 
of following the old model, however, the Commission created a new one. 
In particular, it proposed the creation of a public safety spectrum 
licensee that would receive a nationwide 12 MHz license and use it to 
spearhead the development and deployment of a broadband network (or 
network of networks) to be used by public safety.
    The model of a national public safety spectrum licensee is one that 
poses a number of risks, but I believe that these risks can be managed. 
Moreover, I believe that the principle that networks should be operated 
at higher levels than local agencies--i.e., regional or state--is 
essential to enabling next generation networks to be deployed. In other 
words, the development of regional and national cellular networks is 
not an accident; there are real economies of scale in deploying such 
networks at higher levels. For both cost purposes and expertise 
purposes, the development of next generation networks by a public 
safety spectrum licensee is a considerably better bet than expecting 
localities to do so themselves.
    The national public safety spectrum licensee would enjoy several 
important advantages not available to local agencies who have 
traditionally managed public safety's communications systems. In 
particular, this licensee would be uniquely positioned both to develop 
a more attractive bargain for public safety (by purchasing in bulk and 
using its assembled expertise) and could ensure a level of consistency 
as to the technology adopted by public safety. Today, for example, 
early next generation public safety systems being developed in New York 
and Washington use different technologies and different bands of 
spectrum, meaning that a radio devised for the New York City system 
will not operate in Washington. By contrast, a public safety spectrum 
licensee would be in a position--presumably in concert with a 
commercial operator--to develop a standardized air interface (or a 
relatively economical commitment to a multi-mode device) that would 
afford public safety agencies a similar mobility with their devices to 
that enjoyed by customers of commercial wireless firms.
    One of the principal risks of a national public safety spectrum 
licensee is that this entity will be insufficiently attentive to the 
needs of local public safety agencies and will attempt to craft a ``one 
size fits all'' solution. To guard against this risk, localities should 
be afforded an effective voice as to what kind of offering should be 
available to them. (An alternative safeguard is that local public 
safety agencies would be able to receive Federal grant money and not 
use the offering sponsored by the national public safety spectrum 
licensee provided that they demonstrated that they were adopting 
another effective interoperability solution.) Finally, state, regional, 
or local planning efforts will be critical to developing the 
appropriate rules for how different agencies receive priority to the 
network in different scenarios.
    Fortunately, the nature of Internet Protocol-supported applications 
are that they can easily be adapted to deliver different 
functionalities and to empower local agencies to operate their own 
virtual private networks--even if local agencies do not control the 
physical infrastructure. In fact, that is exactly the model used by 
almost every major American enterprise company. Ideally, leadership at 
the state level will emerge (and be encouraged to emerge by Federal 
policy \6\) to spearhead the development of these networks, public 
safety-centric applications, and wired Internet Protocol backbones that 
can interface with other critical systems (such as E-911 services, 
electric utility information, and public health information). To date, 
however, such state leadership is the exception, not the rule. \7\
---------------------------------------------------------------------------
    \6\ To date, Federal policy has not always effectively encouraged 
strategic leadership at the state level. See U.S. Government 
Accountability Office, First Responders: Much Work Remains to Improve 
Communications Interoperability 20-21(Apr. 2007), available at http://
www.gao.gov/new.items/d07301.pdf 21 (``[A]lthough DHS has required 
states to implement statewide plans by the end of 2007, no process has 
been established for ensuring that states' grant requests are 
consistent with their statewide plans'').
    \7\ The Aspen Institute report, see note 1, supra, discusses the 
importance of such leadership. And, in a promising development, the 
Southern Governors Association is investigating a strategy for 
providing such leadership on a regional basis. See http://
www.southerngovernors.org/resolutions/Interoperability.html.
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IV. The Shared Public Safety/Commercial Wireless Network Concept
    The creation of a national public safety spectrum licensee is the 
essential starting point for the development of an effective next 
generation network. The FCC's proposal to create such a licensee is 
thus an important start for ensuring the development and deployment of 
a next generation network. The next question is whether that is the 
only necessary step. As I will explain, I believe that the Federal 
Government will either need to provide significant funding to subsidize 
the development of this network directly or, as a second best option, 
enable spectrum to be monetized as an asset to support the network 
development and deployment. Let me be clear at the outset--I would 
prefer to see government fund the development of such networks 
directly, but in the absence of this development, the other model may 
well be a second best strategy. Indeed, in the ideal world, such 
funding might come through a reform of the Federal Government's own 
wireless network project (the IWN initiative), which is estimated to 
run between $5 billion to $10 billion and to only serve a limited 
number of Federal agencies.\8\
---------------------------------------------------------------------------
    \8\ See Next Generation Network Report, supra note 1, at 35.
---------------------------------------------------------------------------
    In its proposal for a public safety spectrum licensee, the FCC 
states that the 12 MHz to be licensed to the public safety spectrum 
licensee can be leased to commercial users when not being used by 
public safety (on a preemptible basis). This policy innovation--and it 
is a progressive step away from the silo-mentality that often has 
characterized spectrum policy--offers the licensee a revenue source to 
support the development of a next generation network. Moreover, 
Frontline has suggested that this policy be supplemented with a further 
encumbered 10 MHz band of spectrum that would be auctioned to an entity 
willing to develop a next generation network that would be used by 
public safety (as well as others). In principle, the encumbering of 
spectrum with a requirement to serve public safety would depress the 
price of the relevant spectrum and thereby constitute an indirect 
subsidy to public safety.
    In developing its proposal, Frontline has suggested that an open 
access requirement should be coupled with a commitment to serve public 
safety. The theory behind this proposal appears to be that the current 
wireless operators are insufficiently motivated to support a variety of 
applications and equipment developers, thereby stifling innovation.\9\ 
If this suggestion is indeed valid, policymakers should be concerned 
about a lack of competition in the wireless industry. After all, 
competition is the most powerful and effective facilitator of 
innovation; that is, even in the best of worlds, regulatory responses 
are only a second best strategy. To that end, I am very sympathetic to 
the goal of attracting new entrants (particularly wireless broadband 
providers) via this auction and believe the rules for the auction 
should be hospitable to them. But the proposal to attach an open access 
mandate to spectrum encumbered with a requirement to serve public 
safety seems to me like a misfit as it would limit the number of 
eligible bidders, potentially compromising on the goal of finding the 
best possible partner for public safety.
---------------------------------------------------------------------------
    \9\ To put the issue in terms of economic analysis, it boils down 
to whether the incumbent platform providers view applications 
developers hospitably (i.e., because they make their platform more 
valuable) or as a threat (for any number of possible reasons). For a 
comprehensive discussion on how information platform providers view 
applications developers, see Joseph Farrell & Philip J. Weiser, 
Modularity, Vertical Integration and Open Access Policies: Toward A 
Convergence of Antitrust and Regulation in The Internet Age, 17 Harv. 
J. L. Tech. (2003).
---------------------------------------------------------------------------
    As I emphasized above, the relevant question is how much money 
public safety will be given directly to support the development of next 
generation networks. With enough money, public safety agencies can 
lease spectrum in the marketplace and build a next generation network--
as is currently happening in New York City. Without a commitment of 
serious resources, however, the encumbered spectrum model becomes a 
possible second best strategy. I am not opposed to this strategy and 
appreciate that in the current environment, it might be the best 
opportunity available and a risk worth taking. But if the FCC decides 
to take this risk, I believe it needs to implement a series of measures 
to enhance its chances of success.
V. The Public Safety Spectrum Licensee and the Importance of Effective 
        Governance
    The public safety spectrum licensee concept, whether or not coupled 
with encumbered spectrum such as that proposed by Frontline, must be 
implemented with a number of safeguards to ensure that it will be able 
to deliver on its promise. The first, and in some ways the most 
critical, challenge is to ensure that the public safety spectrum 
licensee is assisted by able and independent advisors so that it can 
negotiate effectively as to how the 12 MHz of spectrum will be used and 
how a next generation network system will be developed and deployed. 
There are a number of important details that will need to be hammered 
out and, just like corporate America relies on specialized consultants 
to craft contracts related to their information and communications 
technology needs, public safety will similarly need the aid of highly 
qualified advisors. Thus, I would emphasize the importance of hiring of 
qualified consultants to aid the public safety spectrum licensee in its 
series of important decisions.
    The second principal strategy related to the public safety spectrum 
licensee concept is that this entity must be held accountable for its 
decisions and the FCC will need to exercise its oversight of the 
relevant licensee to ensure that it is operating responsibly. Notably, 
the FCC's oversight should not entail second guessing of that 
licensee's decisions or invite appellate review of them. It should, 
however, stand ready to investigate any concerns that the licensee is 
abusing its authority.
    The final two strategies related to ensuring an effective public 
safety spectrum licensee function address directly the challenges that 
emerge from the proposal to encumber 10 MHz of spectrum with a 
requirement to serve public safety. Again, whether or not the Frontline 
proposal is adopted, it is both likely and desirable that public safety 
cooperate with commercial firms to develop a joint public safety-
commercial network. In principle, this network would both meet the 
requirements of public safety (to the extent reasonably practicable) 
and enjoy the economies of scale that emerge from a shared network that 
relies on commercially produced equipment (as opposed to equipment 
specially produced for public safety). In short, the Frontline proposal 
raises two wrinkles that require special attention: (1) public safety 
agencies must be afforded with the right to walk away from the proposed 
partnership; and (2) the FCC must ensure that some level of enforcement 
be self-executing (say, binding arbitration) in the event that the 
winner of an auction for encumbered spectrum failed to follow through 
on its commitments.
    As I noted above, a proposal like the Frontline model reflects a 
second best strategy in the absence of an available revenue source to 
support the development and deployment of a next generation network for 
public safety. Significantly, the Frontline proposal is not premised on 
any need by public safety agencies to gain access to more spectrum to 
deploy such a network. Indeed, without any additional spectrum 
assignment at all, the City of New York is contracting for the 
development and deployment of a next generation network. But the City 
of New York is able to contract for that network because it possesses 
the necessary financial resources to do so. Thus, unless there is a 
more robust funding commitment from the Federal Government, the option 
of using encumbered spectrum becomes a plausible second best strategy.
    The advantage of simply endowing the public safety spectrum 
licensee with a funding commitment is that this model makes clear that 
they are in the driver's seat when it comes to negotiating the relevant 
contractual terms. In the case of an encumbered spectrum solution, the 
nature of the negotiation becomes more complex and, in the worst 
possible case, it might represent a ``forced marriage'' whereby the 
public safety spectrum licensee is, in effect, coerced to deal (and 
share its spectrum) with an entity that it views as either unqualified 
or untrustworthy to deliver on its promises. To avoid this scenario, 
the public safety spectrum licensee must be in a position to walk away 
from any possible deal with the winner of an auction for encumbered 
spectrum. Moreover, if the public safety spectrum licensee did walk 
away from such a partnership for ``reasonable grounds,'' the winner of 
the encumbered spectrum would necessarily be judged unable to deliver 
on its commitment to facilitate the development of a next generation 
network for public safety.\10\ Going forward, it will be important that 
the public safety spectrum licensee and its commercial partner develop 
strategies for instituting new requirements to meet the needs of public 
safety and ensure that the commercial partner is not able to take 
advantage of public safety--i.e., in effect becoming an unregulated 
monopoly.\11\
---------------------------------------------------------------------------
    \10\ It is critical that any consequences to the winner of an 
auction for encumbered spectrum be confined to a ``reasonable grounds'' 
scenario. Otherwise, the public safety spectrum licensee would have an 
incentive to use its hold-out leverage to extract unfair and 
inappropriate concessions from the encumbered spectrum licensee.
    \11\ The public safety spectrum licensee and its commercial partner 
will, in all likelihood, enter into what economists call a ``bilateral 
monopoly relationship.'' Such partnerships are generally characterized 
by mechanisms to guard against undue opportunistic behavior by one 
side, including a stylized ``hostage exchange'' scenario, where each 
side gives something of value to the other and can threaten to keep it 
in the event the other side acts unreasonably. See Oliver Williamson, 
The Mechanisms of Governance (1996).
---------------------------------------------------------------------------
    The second important safeguard that should accompany the award of a 
spectrum license with a commitment to provide a next generation network 
to public safety is that there must be real and self-executing 
enforcement mechanisms. The history of spectrum policy is littered with 
the commitments of spectrum licensees who made, and have failed to 
keep, any number of assorted commitments. As noted above (and as I have 
argued elsewhere \12\), the use of a spectrum license to generate 
public interest benefits is suboptimal to using direct fiscal support 
to achieve those benefits. But the fact that this approach has failed 
elsewhere does not mean it is destined to failure here--only that 
regulators should approach any regulatory bargain with their eyes open 
and a well devised strategy to hold a licensee to its commitments.
---------------------------------------------------------------------------
    \12\ See Phil Weiser, ``Promoting Informed Deliberation and A First 
Amendment Doctrine For A Digital Age: Toward A New Regulatory Regime 
for Broadcast Regulation,'' Deliberation, Democracy, and the Media 
(Costain and Chambers, eds., 2000). As Richard Posner explained in his 
classic article, the use of a spectrum license--or any regulatory 
program--to achieve such benefits indirectly can be termed ``taxation 
by regulation.'' Richard Posner, Taxation by Regulation, 3 Bell J. 
Econ. 22 (1971). As Posner explained, such an approach has certain 
merits, but also comes with notable risks. Id.
---------------------------------------------------------------------------
    In terms of the relevant commitments that a licensee should be 
forced to make, I am aware that overly onerous commitments could 
backfire insofar as they might undermine the ability of the licensee to 
attract sufficient funding via the capital markets. This concern, 
however, only means that the relevant performance bond, lien on the 
spectrum, or lien on the infrastructure should be triggered with 
sufficient sensitivity so that public safety does not possess an 
ability to pull out the rug from the licensee unfairly. Again, the 
historical concern tends to argue that the more realistic scenario 
would be an overly forgiving posture toward a failure to perform rather 
than an overly harsh judgment as to whether a licensee had actually 
performed. In short, an appropriately balanced enforcement mechanism 
should be clear, provide fair warning, be self-executing (i.e., not 
require a lengthy proceeding), and provide significant consequences so 
as to ensure effective performance.
VI. The Importance of Ongoing Innovation and Responsible Leadership
    Before I conclude, I must emphasize that the current focus on the 
upcoming auction and the proposals now taking center stage should be 
kept in appropriate perspective. In particular, the current 700 MHz 
auction is not the last opportunity to facilitate improvements in 
public safety communications. Rather, it is merely one important 
chapter in an ongoing effort to improve the use of information and 
communications technology by public safety.
    As I have discussed above, a next generation network offers 
enormous opportunities for public safety agencies to operate more 
efficiently. Indeed, if the public safety spectrum licensee can help 
facilitate the development of a hybrid traditional land mobile radio 
and broadband device, that development will provide public safety 
agencies with access to capabilities that will enable them to perform 
far more effectively, more efficiently, and facilitate improved 
interoperability using Internet Protocol connections. The development 
of such a device, however, should only be the beginning of an ongoing 
technological development cycle that will enable public safety agencies 
to operate more effectively. Indeed, one important architectural 
feature of a next generation network is that it can allow ongoing 
modular development and the use of secondary systems (e.g., commercial 
cellular systems, municipal WiFi systems, and satellite technology) to 
supplement the principal communications systems.
    The traditional model of buying expensive and specialized equipment 
dedicated to public safety has disserved public safety agencies by 
ensuring that they operate networks using equipment that is quickly 
antiquated and expensive to replace. A new model whereby public safety 
agencies purchase equipment premised on commercially developed 
standards would break from this tradition by enabling public safety 
agencies to benefit from technological advancements on an ongoing 
basis. Consider, for example, that cognitive radio technology continues 
to improve and should be able to ultimately facilitate the use of 
radios that can operate both at different frequencies and using 
different modes, thereby providing a promising interoperability 
solution.\13\ Similarly, the ongoing development of satellite 
technology that can operate in conjunction with terrestrial wireless 
networks (the so called ``ancillary terrestrial component'' systems) 
could also have a significant impact on public agencies by enabling 
them to have a redundant communications connection as well as a way to 
reach all outdoor coverage areas.\14\
---------------------------------------------------------------------------
    \13\ SDR Forum, Software Defined Radio Technology for Public Safety 
26 (Apr. 14, 2006), 
http://www.sdrforum.org/uploads/
pub_36302706_a_0001_v_0_00_public_safety
_04_14_06.pdf (``the flexibility inherent in [software defined radio] 
technology facilitates multi-protocol, multi-band and multi-service 
devices that can operate across multiple systems, thereby supporting 
the `system of systems'concept for public safety communications.''); 
Testimony of Stephen Devine, supra note 4 (suggesting that ``new 
frequency agile software based radios, capable of operating on multiple 
public safety frequency bands, can soon be used as a tool to bridge 
existing gaps between frequency bands'').
    \14\ This point is more fully elaborated upon in Phil Weiser, Dale 
Hatfield and Brad Bernthal, Toward A Next Generation Architecture For 
Public Safety Communications, available at 
http://papers.ssrn.com/sol3/papers.cfm?abstractt_id=903151.
---------------------------------------------------------------------------
    The new policy model necessary to promote a next generation network 
will take time for the relevant stakeholders to adjust to a new 
opportunity. For this model to be successful, it is critical that, in 
addition to spectrum policy decisions by the FCC, other governmental 
actors (such as the Department of Homeland Security, the National 
Telecommunications and Information Administration, and state and local 
governments) all embrace and support this new policy strategy. Even 
with the effective focus of all involved, this process will take years 
to succeed and, even when complete, it will, by necessity, be imperfect 
in terms of its overall coverage and capacity. This model, however, 
provides a far more effective solution to the ongoing failings of 
public safety communications than any other strategy I can fathom.
Conclusion
    In short, I commend the Federal Communications Commission for 
recognizing that public safety must take advantage of new information 
and communications technology opportunities--i.e., the promise of a 
next generation network built around broadband technology--by acting as 
an enterprise that seeks to leverage the advances of a converged 
ecosystem. That ecosystem features ongoing development of new 
technologies for commercial users and, with a commitment by public 
safety to adapt such technologies for its own needs, it can avoid the 
mistake of the Project 25 initiative. In that case, public safety 
operated in an environment where it was confined to its own silo and 
could only use equipment produced uniquely for it. By embracing a 
strategy whereby it shares spectrum with one or more commercial 
partners, public safety will facilitate a win-win arrangement where 
unused public safety spectrum can be put to good use, money from that 
leasing arrangement can be dedicated to supporting public safety's 
advanced communications needs, and public safety can have access to 
more spectrum (than it would itself control) when it needs it.
    The opportunity to develop a next generation network to afford 
public safety access to cutting edge technologies will require a major 
reorientation on the part of all stakeholders as to how public safety 
agencies use communications technology. This reorientation will require 
leadership on the Federal, state, and local levels as well as a 
compelling explanation as to how the public safety spectrum licensee 
concept can facilitate opportunities that will otherwise not become 
available or will be prohibitively expensive for most agencies. I 
recognize that the public safety spectrum licensee concept comes with 
some risks, but provided that this licensee is supported by able 
advisors and with a sensitivity toward the needs of individual 
localities, I believe this policy strategy is a sound linchpin of the 
effort to spur the development of a next generation network. It can 
only succeed, however, if other stakeholders rally around this strategy 
and embrace the importance of a next generation network and work hard 
to make it a success.

    The Chairman. I thank you very much.
    And may I call upon Commissioner Cosgrave.

STATEMENT OF PAUL J. COSGRAVE, COMMISSIONER AND CIO, DEPARTMENT 
                 OF INFORMATION TECHNOLOGY AND 
              TELECOMMUNICATIONS, CITY OF NEW YORK

    Mr. Cosgrave. Thank you, Chairman Inouye, Vice Chairman 
Stevens, and Members of the Committee.
    My name is Paul Cosgrave. I am the Commissioner of New York 
City's Department of Information Technology Telecommunications. 
I also serve as New York City's Chief Information Officer. Some 
of you may also remember me when I worked here as the CIO for 
the Internal Revenue Service.
    On behalf of the City of New York, thank you for the 
opportunity to appear before you today to discuss how the 
interests of public safety communications can be safeguarded in 
the upcoming 700 MHz band auctions. Clearly, public safety 
communications continue to face significant challenges and 
uncertainties, even as the February 2009 deadline for a 
transition of 700 MHz spectrum to public safety and commercial 
use fast approaches. New York City appreciates the FCC's 
interest in potentially utilizing the upcoming 700 MHz spectrum 
auction to advance public safety communications and this 
Committee's examination of the issue.
    At the same time, however, we're deeply concerned about the 
potential consequences of any FCC decision that mandates 
establishment of a nationwide public/private broadband network 
which would be shared by public safety and commercial users. 
Under the Frontline Wireless plan, a nationwide public/private 
network would be deployed in 22 MHz of spectrum in the 700 MHz 
band--as you know, 12 MHz of which has been currently allocated 
to public safety, and 10 MHz which is scheduled for commercial 
auction. The auction winner would build a nationwide network 
and negotiate with a newly established national public safety 
licensee over respective access rights. Commercial users would 
receive secondary access to the public safety segment, and 
public safety would receive emergency access to the commercial 
segment.
    The City of New York certainly welcomes the establishment 
of rules that would make more spectrum available in the 700 MHz 
and other frequency bands for public/private partnerships on a 
voluntary basis for both voice and data communications. 
However, we're concerned about the imposition of such a 
sweeping mandate, particularly after only, at most, 2 months of 
consideration and debate.
    Ultimately, New York City's present view is that public/
private partnerships should be optional. Furthermore, decisions 
to enter in such partnerships, along with coordination 
decisions, should take place at the regional, rather than at 
the national, level. And, finally, the Federal Government must 
not dictate use of particular frequency bands or technologies.
    The sudden emergence and popularity of proposals for 
public/private partnership appears at least partly due to a 
misperception that the public safety community is unable to 
solve its own communications and interoperability needs. This 
is typically accompanied by the view that the Federal 
Government has invested massive funding and allocated a great 
deal of spectrum to support local public safety efforts and 
that commercial intervention is now necessary.
    Consequently, I believe it is relevant to this hearing for 
me to share, briefly, New York City's perspective on Federal 
funding in spectrum allocations for public safety 
communications and to describe the state-of-the-art broadband 
wireless network New York City is deploying virtually without 
Federal support.
    Unfortunately, for more than a decade the Federal 
Government's provisioning of funding and spectrum to State and 
local public safety communications has, in fact, been 
inadequate. New York City, which is at the highest risk for 
another terrorist attack, has committed more than $1 billion of 
local taxpayer money since the 9/11 attacks to enhance our 
public safety voice and data communications networks and to 
upgrade and to harden our E-911 infrastructure. At the same 
time, we receive less than 20 cents on the dollar in federally-
funded support to assist these homeland security-related 
initiatives.
    Equally distressing is the perception that public safety 
has inefficiently used radio spectrum. Nearly 11 years ago, on 
September 11, 1996, a high-level Federal advisory committee 
summarized, ``Not only does the shortage of spectrum jeopardize 
the lives and health of public safety officials, it threatens 
their ability to fully discharge their duty to protect the 
lives and property of all Americans.''
    Regrettably, since that warning cry 11 years ago, there has 
been no national provision of spectrum to support emergency 
responder voice communications. Indeed, absent action by this 
Committee last year, public safety would have been forced to 
wait well beyond 2009 for the 700 MHz spectrum. In addition, 
there has only been a single--much appreciated, but exceedingly 
inadequate--provision of 4.9 GHz spectrum to support data 
applications.
    So, to summarize, the lack of Federal financial support and 
spectrum, rather than the flawed or inadequate efforts by the 
State and local public safety communities, are at the heart of 
the challenge to achieve advanced broadband services and 
interoperability.
    In March 2004, New York City issued a request for proposal 
for the implementation of a broadband wireless network for 
public safety to support our own highspeed public safety data 
needs. The solicitation, which was agnostic as to spectrum and 
technology, challenged the country's leading systems 
integrators to propose the best-available solution. At the 
time, no Federal programs were available to assist us in this 
initiative, and the public safety segment of the 700 MHz band 
was earmarked by the FCC for narrowband and wideband 
applications rather than for broadband use. Consequently, the 
city, at considerable local expense, went it alone.
    In September 2006, after evaluating and testing several 
competing solutions, New York City contracted with Northrop 
Grumman to deploy a $500 million highspeed data network for 
public safety. The network, known as New York City Wireless 
Network, or NYCWiN, will enable a wealth of mobile and fixed 
applications, including real-time video, rapid-response lookup, 
and exchange of rich graphical information. NYCWiN will provide 
critical real-time information to the city's first responders 
when and where they need it.
    The network, which is already operational in Lower 
Manhattan and scheduled for citywide deployment by March 2008, 
utilizes 10 MHz of licensed spectrum in the 2.5 GHz band, 
spectrum which New York City has, indeed, purchased at market 
rates. NYCWiN employs UMTS technology, which is well suited for 
highspeed mobile data applications. Moreover, NYCWiN is an IP-
based network enabling fully interoperable data communications. 
Essentially, information can be shared instantaneously among 
multiple agencies. New York City is working through its 
existing interoperable communications relationships with its 
partners in the State, Federal, and regional public safety 
agencies to ensure their access to the network, as well.
    The FCC is now considering a nationwide buildout of a 
public/private network for first responders on the 700 MHz 
frequency, which aims for capabilities similar to what we've 
done with NYCWiN. New York City has described, in comments 
filed with the FCC, various factors that the FCC should 
consider in evaluating the merits of such a proposal. In the 
interest of time, I'll outline only our two most pressing 
concerns:
    First, a national network based on one-size-fits-all 
approach may not meet the disparate communications needs of 
emergency responders throughout the country.
    And, second, it's not clear such a network would be 
engineered to meet the demanding mission-critical needs of 
public safety.
    With respect to the one-size-fits-all approach, as I just 
described, New York City is implementing a broadband data 
network that utilizes UTMS technology on the 2.5 GHz band. 
Recently, the District of Columbia opted to deploy a broadband 
network, as well, that utilizes a different technology--EV-DO 
technology--and different frequency; they're deploying on 700 
MHz.
    These cities' respective decisions were dictated by the 
fact that New York City and the Capital region must contend 
with much different physical environments and different 
operational priorities. Any scheme for a national network must, 
from technology and spectrum-related standpoints, ensure that 
each implementing public safety jurisdiction has the 
flexibility to evaluate and respond to its own circumstances, 
both physical and operational. It should be no surprise that 
the same technology and spectrum that works well in New York 
City may not work well in Los Angeles, Boise, or, for that 
matter, even in Buffalo, New York.
    So, to accommodate these differences, the policies and 
rules governing the 700 MHz band must recognize the need for 
flexibility and discretion at the local, State, and regional 
levels. New York City has implemented citywide and regional 
interoperability protocols between and among our emergency 
responders and those of neighboring counties in New York, as 
well as in New Jersey, along with regional authorities and 
various State and Federal agencies.
    New York City participates in several regional planning 
bodies, including the Region 8 Regional Planning Committee, 
which currently coordinates use of 700 MHz and 800 MHz 
channels. The regional role in interoperability planning should 
be preserved with respect to broadband. Nor does the proposal 
for a national public safety licensee officially address how 
channel allocation and frequency coordination will take place 
among various local, State, and Federal entities operating in a 
common area and/or responding to the same emergency.
    New York City's second major concern is that the proposed 
700 MHz public/private network will, in fact, be dominated by 
commercial interests, and that deployment and maintenance will 
be undertaken based on a return of investment rather than 
effectiveness of emergency response.
    The current FCC rulemaking includes no parameters to uphold 
mission-critical standards, and public safety agencies have no 
recognizable right, such as a license, to protect their 
interests. Moreover, the current proposal provides no 
indication of how the FCC will address the complex issues of 
ensuring that public safety has priority access, vis-a-vis 
commercial interests, and that access among various public 
safety authorities is appropriately prioritized.
    Ultimately, emergency responders must not be forced to rely 
on a carrier-grade network, which would most likely not be 
available to them when it is most needed. Anyone who's ever 
experienced a large-scale emergency knows that cell phone 
communications quickly deteriorate and soon become impossible. 
This is a result of several factors, including competition 
among callers for access to cell antennas, possible degradation 
of the wired backbone interconnecting the network, and 
frequently the loss of both commercial and backup power to the 
network.
    Compare this to NYCWiN. In the event of a major emergency, 
New York City Government will be able to prioritize network 
access among various agencies and users. The network is being 
built with redundant backbones, overlapping coverage, and a 
minimum of 24-hour backup power at every site. One cannot 
imagine that a commercial carrier would be willing to invest 
the capital required to build such a robust, redundant network 
in New York City.
    Public safety cannot be put in the position of sharing a 
plain vanilla network, which, quite frankly, is really no 
option at all.
    In the final analysis, public safety systems stand in stark 
contrast to commercial systems. Deploying and maintaining 
public safety systems entail much more detailed requirements, 
analysis, engineering, testing, and training. Heightened 
requirements include capacity, coverage, system restoration, 
reliability, and security. Public safety networks require 
greater diversity and redundancy. Moreover, there can be no 
experimentation in the public sector. As I think you all know, 
lives are at stake.
    In conclusion, the public/private partnership model holds 
promise and should continue to be developed as a means of 
deploying next-generation voice and data networks using various 
frequency bands. However, this model is also very new and, 
frankly, untested. Mandating that a portion of the limited 
spectrum currently allocated to public safety be used for a 
nationwide public/private broadband network in the 700 MHz band 
is fraught with uncertainties and risks.
    Chairman Inouye, this completes my statement. The City of 
New York greatly appreciates the privilege to be here today.
    Thank you.
    [The prepared statement of Mr. Cosgrave follows:]

     Prepared Statement of Paul J. Cosgrave, Commissioner and CIO, 
 Department of Information Technology and Telecommunications, City of 
                                New York
    Chairman Inouye, Vice Chairman Stevens, Members of the Committee:
    My name is Paul Cosgrave. I am the Commissioner of New York City's 
Department of Information Technology and Telecommunications. I also 
serve as New York City's Chief Information Officer.
    On behalf of the City of New York, thank you for the opportunity to 
appear before you today to discuss how the interests of public safety 
communications can be safeguarded in the upcoming 700 MHz band 
auctions.
    Clearly, public safety communications continue to face significant 
challenges and uncertainties--even as the February 2009 deadline for 
transition of 700 MHz spectrum to public safety and commercial use fast 
approaches.
    New York City appreciates the FCC's interest in potentially 
utilizing the upcoming 700 MHz spectrum auction to advance public 
safety communications, and this Committee's examination of the issue. 
At the same time, however, we are deeply concerned about the potential 
consequences of any FCC decision that mandates establishment of a 
nationwide, public-private broadband network, which would be shared by 
public safety and commercial users.
    Under the Frontline Wireless plan, a nationwide, public-private 
network would be deployed on 22 MHz of spectrum in the 700 MHz band--12 
MHz of which is currently allocated to public safety, and 10 MHz of 
which is scheduled for commercial auction. The auction winner would 
build a nationwide network, and negotiate with a newly established 
national public safety licensee over respective access rights. 
Commercial users would receive ``secondary access'' to the public 
safety segment, and public safety would receive ``emergency access'' to 
the commercial segment.
    The City of New York certainly welcomes the establishment of rules 
that would make more spectrum available in the 700 MHz and other 
frequency bands for public-private partnerships on a voluntary basis--
for both voice and data communications. However, we are concerned about 
the imposition of such a sweeping mandate, particularly after only a 
few months of consideration and debate. Ultimately, New York City's 
present view is that public-private partnerships should be optional. 
Furthermore, decisions to enter into such partnerships, along with 
coordination decisions, should take place at the regional, rather than 
at the national level. And, finally, the Federal Government must not 
dictate use of particular frequency bands or technologies.
    The sudden emergence and popularity of proposals for public-private 
partnerships appears at least partly due to a misperception that the 
public safety community is unable to ``solve'' its own communications 
and interoperability needs. This is typically accompanied by the view 
that the Federal Government has invested massive funding and allocated 
a great deal of spectrum to support local public safety efforts--and 
that commercial intervention is now necessary.
    Consequently, I believe it is relevant to this hearing for me to 
share, briefly, New York City's perspective on Federal funding and 
spectrum allocations for public safety communications; and to describe 
the state-of-the-art broadband wireless network New York City is 
deploying--virtually without Federal support.
    Unfortunately, for more than a decade, the Federal Government's 
provision of funding and spectrum to state and local public safety 
communications has been inadequate. New York City, which is at highest 
risk for another terrorist attack, has committed more than $1 billion 
of local taxpayer money since the 9/11 attacks--to enhance our public 
safety voice and data communications networks, and to upgrade and 
``harden'' our E-911 infrastructure. At the same time, we have received 
less than twenty cents on the dollar in Federal financial support to 
assist these homeland security-related initiatives.
    Equally distressing is the perception that public safety has 
inefficiently used radio spectrum. Nearly eleven years ago, on 
September 11, 1996, a high-level Federal advisory committee summarized: 
``Not only does the shortage of spectrum jeopardize the lives and 
health of public safety officials, it threatens their ability to fully 
discharge their duty to protect the lives and property of all 
Americans.''
    Regrettably, since that warning cry, there has been no national 
provision of spectrum to support emergency responder voice 
communications. Indeed, absent action by this Committee last year, 
public safety would have been forced to wait well beyond 2009 for the 
700 MHz spectrum. In addition, there has been only a single--much 
appreciated but exceedingly inadequate--provision of 4.9 GHz spectrum 
to support data applications.
    To summarize, the lack of Federal financial support and spectrum--
rather than flawed or inadequate efforts by the state and local public 
safety communities--are at the heart of the challenge to achieve 
advanced broadband services and interoperability.
    In March 2004, New York City issued a Request for Proposals for the 
implementation of a broadband wireless network for public safety to 
support our own high-speed public safety data needs. The solicitation, 
which was agnostic as to spectrum and technology, challenged the 
country's leading systems integrators to propose the best available 
solution.
    At the time, no Federal programs were available to assist the City 
in this initiative; and the public safety segment of the 700 MHz band 
was earmarked by the FCC for narrowband and wideband applications, 
rather than for broadband use. Consequently, the City, at considerable 
local expense, ``went it alone.''
    In September 2006, after evaluating and testing several competing 
solutions, New York City contracted with Northrop Grumman to deploy a 
$500 million high-speed data network for public safety. The network, 
known as the New York City Wireless Network, or ``NYCWiN,'' will enable 
a wealth of mobile and fixed applications, including real-time video, 
rapid database lookup and the exchange of rich graphical information. 
NYCWiN will provide critical, real-time information to the City's first 
responders where and when they need it.
    The network, which is already operational in Lower Manhattan, and 
scheduled for citywide deployment by March 2008, utilizes 10 MHz of 
licensed spectrum in the 2.5 GHz band--spectrum which New York City has 
indeed purchased at market rates. NYCWiN employs UMTS technology, which 
is well suited for high-speed mobile data applications. Moreover, 
NYCWiN is an IP-based network, enabling fully interoperable data 
communications. Essential information can be shared instantaneously 
among multiple agencies. New York City is working through its existing 
interoperable communications relationships with its partners in state, 
Federal and regional public safety agencies to ensure access to the 
network.
    The FCC is now considering a nationwide buildout of a public-
private network for first responders, on the 700 MHz frequency band, 
which aims for capabilities similar to those of NYCWiN.
    New York City has described in comments filed with the FCC various 
factors that the FCC should consider in evaluating the merits of such a 
proposal. In the interest of time, I will outline our two most pressing 
concerns.
    First, a national network, based on a ``one-size-fits-all'' 
approach, may not meet the disparate communications needs of emergency 
responders throughout the country. Second, it is not clear such a 
network would be engineered to meet the demanding, mission-critical 
needs of public safety.
    With respect to the one-size-fits all approach, as I just 
described, New York City is implementing a broadband data network that 
utilizes UMTS technology and the 2.5 GHz band. Recently, the District 
of Columbia opted to deploy a broadband network that utilizes a 
different technology (EV-DO), and different frequency band (700 MHz). 
These cities' respective decisions were dictated by the fact that New 
York City and the Capital Region must contend with much different 
physical environments and different operational priorities.
    Any scheme for a national network must, from technology- and 
spectrum-related standpoints, ensure that each implementing public 
safety jurisdiction has the flexibility to evaluate and respond to its 
own circumstances, both physical and operational. It should surprise no 
one that the same technology and spectrum that ``works'' for New York 
City may not be very well suited to Los Angeles, and Boise, and 
Buffalo.
    To accommodate these differences, the policies and rules governing 
the 700 MHz band must recognize the need for flexibility and discretion 
at the local, state and regional levels. New York City has implemented 
citywide and regional interoperability protocols between and among our 
emergency responders and those of neighboring counties in New York and 
New Jersey, along with regional authorities and various state and 
Federal agencies.
    Toward this end, the City participates in several regional planning 
bodies, including the Region 8 Regional Planning Committee, which 
currently coordinates use of 700 MHz and 800 MHz channels. The regional 
role in interoperability planning should be preserved with respect to 
broadband. Nor does the proposal for a national public safety licensee 
sufficiently address how channel allocation and frequency coordination 
will take place among various local, state and Federal entities 
operating in a common area and/or responding to the same emergency.
    New York City's second major concern is that the proposed 700 MHz 
``public-private'' network will, in fact, be dominated by commercial 
interests, and that deployment and maintenance will be undertaken based 
on a return on investment, rather than effectiveness of emergency 
response. The current FCC rulemaking includes no parameters to uphold 
mission-critical standards; and public safety agencies have no 
recognizable right, such as a license, to protect their interests. 
Moreover, the current proposal provides no indication of how the FCC 
will address the complex issues of ensuring that public safety has 
priority access vis-a-vis commercial interests, and that access amongst 
various public safety authorities is appropriately prioritized.
    Ultimately, emergency responders must not be forced to rely on a 
carrier-grade network, which would most likely not be available to them 
when it is most needed. Anyone who has ever experienced a large-scale 
emergency knows that cell phone communications quickly deteriorate and 
soon become impossible. This is the result of several factors, 
including ``competition'' among callers for access to cell antennas; 
possible degradation of the wired backbone interconnecting the network; 
and, frequently, the loss of both commercial and backup power to the 
network.
    Compare this to NYCWiN. In the event of a major emergency, New York 
City government will be able to prioritize network access among various 
agencies and users. The network is being built with redundant 
backbones, overlapping coverage and a minimum of 24-hour backup power 
at each site. One cannot imagine that a commercial carrier would be 
willing to invest the capital required to build such a robust network 
in New York City. Public safety cannot be put in the position of 
sharing a ``plain vanilla'' network, which, quite frankly, is no option 
at all.
    In the final analysis, public safety systems stand in stark 
contrast to commercial systems. Deploying and maintaining public safety 
systems entail much more detailed requirements analyses, engineering, 
testing and training. Heightened requirements include capacity, 
coverage, system restoration, reliability and security. Public safety 
networks require greater diversity and redundancy. There can be no 
experimentation in the public safety sector, because lives are at 
stake.
    In conclusion, the public-private partnership model holds promise; 
and should continue to be developed as a means of deploying next-
generation voice and data networks utilizing various frequency bands. 
However, this model is also new and untested. Mandating that a portion 
of the limited spectrum currently allocated to public safety be used 
for a nationwide, public-private broadband network on the 700 MHz band 
is fraught with uncertainties and risks.
    Chairman Inouye, this completes my statement. The City of New York 
appreciates very much the privilege to participate in the Committee's 
hearing. I would be pleased to respond to your questions.

    Senator Lott. Mr. Chairman?
    The Chairman. Senator Lott?

                 STATEMENT OF HON. TRENT LOTT, 
                 U.S. SENATOR FROM MISSISSIPPI

    Senator Lott. At this point--could I ask unanimous consent 
to include in the record, a letter to the FCC from the Rural 
Cellular Association and Cellular South, Incorporated?
    The Chairman. Without objection, so ordered.
    [The information previously referred to follows:]

                             Lukas, Nace, GutIerrez & Sachs
                                          McLean, VA, June 13, 2007
Via Electronic Filing
Marlene H. Dortch,
Secretary,
Federal Communications Commission,
Washington, DC.
Re: Response to CTIA Coordinated Ex Parte Communication--PS Docket 
                    No. 06-229; WT Docket Nos. 96-86, 06-150, 06-16
Dear Ms. Dortch:
    On behalf of Rural Cellular Association \1\ and Cellular South, 
Inc.,\2\ this letter is to respond to the Ex Parte Communication 
coordinated by CTIA on behalf of 55 entities that oppose adoption of 
the Commission's proposed geographic build-out requirements in the 700 
MHz Service Rules proceeding.
---------------------------------------------------------------------------
    \1\ RCA is an association representing the interests of 
approximately 100 small and rural wireless licensees providing 
commercial services to subscribers throughout the Nation. RCA's 
wireless carriers operate in rural markets and in a few small 
metropolitan areas. No member has as many as 1 million customers, and 
all but two of RCA's members serve fewer than 500,000 customers.
    \2\ Cellular South is the Nation's largest privately-owned wireless 
carrier serving all of Mississippi and portions of Alabama, Tennessee, 
Arkansas and Florida. Most of the area served by Cellular South is 
rural in nature.
---------------------------------------------------------------------------
    The CTIA letter misconstrues the Commission's geographic build-out 
proposal as one that would ``force'' or ``compel'' 700 MHz licensees to 
construct facilities beyond the areas the licensees prefer to serve. 
That is simply not the case. In the Commission's words the proposal in 
question ``. . . combines performance requirements based on geographic 
benchmarks and a `keep what you use' rule.'' \3\ This arrangement would 
allow licensees to make economically sound business decisions based on 
their ability and willingness to serve consumers in any area. To the 
extent that any licensee chooses not to serve a part of its license 
area the spectrum rights to that area would be relinquished, but not 
before the licensee has opportunities after three, five and 8 years to 
protect a percentage of the market adjacent to the served areas. The 
licensee would always be in control of decisionmaking over what areas 
would be served, protected or relinquished.
---------------------------------------------------------------------------
    \3\ Report and Order and Further Notice of Proposed Rulemaking in 
WT Docket No. 06-150, et al (FCC 0772), at para. 212.
---------------------------------------------------------------------------
    A ``keep what you use'' system is consistent with the pursuit of 
market-based solutions and has the added value of curbing potential 
inefficiencies such as spectrum stockpiling or a licensee's inability 
to build-out the areas for which it is licensed. Secondary market 
transactions including spectrum leasing likewise could allow a licensee 
to work with other companies that are willing to serve areas not a 
priority for the original licensee.
    Strict performance requirements based on geographic coverage are 
vital to promoting near-term availability of wireless broadband 
services in rural areas. The Commission's proposal properly recognizes 
that effective use of 700 MHz spectrum to be auctioned will best serve 
consumer interests. Rural communities deserve the opportunity to 
experience all the advantages that wireless broadband can offer. The 
alternative proposed in the CTIA letter is equivalent to proceeding 
without a safety net to guard against market failure and consumer harm.
            Respectfully submitted,
                                                      David L. Nace
cc: Christopher Guttman-McCabe, CTIA

    Senator Lott. And I would like to just like to thank the 
panel for their testimony. In particular, I'd like to recognize 
Mr. Barksdale, from my home State, college contemporary, a real 
leader in telecommunications and business. We appreciate all 
you do, and we appreciate, in this instance, once again, your 
willingness to get involved, even though it's not something you 
particularly need; you're involved in it, because of your 
interest in public service. And whether people agree or 
disagree with what you're trying to do, I think you should be 
commended for your effort, and I thank you for that.
    Thank you.
    The Chairman. I thank you very much.
    Because of the time element, I will be submitting my 
questions to the panel.
    But my primary interest with respect to public safety is to 
determine which option we've been discussing would give our 
first responders the best chance of building a nationwide 
interoperable broadband-capable network.
    As I see it, first, we can rely on local and regional 
public safety networks, as we do now; or, second, we can use 
the 12 MHz already allocated to public safety for a national 
network; or, three, we can do something like the Frontline 
proposal and use public safety's 12 MHz along with 10 MHz of 
commercial spectrum.
    Under each of these scenarios, I'd like to know, what is 
your best estimate as to how much it will cost public safety to 
build and operate a next-generation broadband network? And how 
long will it take to build this network across the Nation?
    So, this is a complex question that takes some 
consideration, so I would hope that you will carefully respond 
to this question.
    May I now call on Senator Stevens?
    Senator Stevens. Well, thank you, Mr. Chairman.
    I will submit some questions also.
    But I want to try to examine this, and I don't want to be 
offensive, but it sort of looks like this is ``Cyren Call'' 
like proposal, that we really rejected the past approach, and 
we're approaching, now, a different concept, but it comes back 
to the same thing, as I see it.
    Now--I could be disabused of that--now, Mr. Barksdale, it's 
my understanding that Frontline has indicated it will not 
comply with 9-1-1 requirements or CALEA, in terms of public 
safety, in terms of handling the mandatory court-ordered 
wiretaps for public safety, and you will not handle 9-1-1. Is 
that right?
    Mr. Barksdale. That is not correct, Senator.
    Senator Stevens. What?
    Mr. Barksdale. I'm sorry, I need to turn this on.
    That is not correct. We would be supportive of that, and 
we've already told the FCC that we would support those.
    Senator Stevens. You would comply----
    Mr. Barksdale. I don't know where the----
    Senator Stevens.--with them?
    Mr. Barksdale. Sir--yes, sir.
    Senator Stevens. I'm told that Frontline indicated to the 
FCC it does not want to take on those requirements, and asked 
to be absolved from complying.
    Mr. Barksdale. I do not know where that came from, but we 
have now told the FCC we'd be happy to do that. I also would 
point out----
    Senator Stevens. I only have 5 minutes, now. And----
    Mr. Barksdale. Yes, sir.
    Senator Stevens.--this is from the FCC, ``We seek comment, 
as well, on Frontline's view there's no need to impose CALEA, 
E-911, or similar obligations on the `E Block' licensee, 
because it believes that retail service provides that spectrum 
and already is subject to similar requirements''----
    Mr. Barksdale. Yes.
    Senator Stevens.--``for the blocks that they already 
have''--not this----
    Mr. Barksdale. Yes----
    Senator Stevens.--block, but the block----
    Mr. Barksdale.--that was the FCC's language. We submitted 
technical papers that said that we could comply with it.
    Senator Stevens. Well, it's my understanding that that's 
what Frontline submitted to FCC. All right, well, I'd like to 
have that straightened out.
    Mr. Barksdale. That's not true. This man who wrote the 
document----
    Senator Stevens. I'd appreciate it if you'd straighten it 
out for the record.
    Mr. Barksdale. Yes, sir, I--we will get you the----
    Senator Stevens. Our counsel----
    Mr. Barksdale.--exact answer.
    Senator Stevens.--says that was filed with the FCC.
    Mr. Barksdale. I will make sure you get the exact answer--
--
    Senator Stevens. All right.
    Mr. Barksdale.--in response----
    Senator Stevens. Now----
    Mr. Barksdale.--to that.
    Senator Stevens.--the Frontline proposal calls for allowing 
anyone anywhere to access their dual-use network, as I 
understand it. If that's the case, then how can we say this is 
a public safety network?
    Mr. Barksdale. Because normally we're not having hurricanes 
and 9/11, and public safety, the amount of the 20 MHz it would 
be using, in most markets--not all, certainly, and maybe more 
in New York than in Boise--is a lower percentage of this 
enormous amount of spectrum. And then, when there is----
    Senator Stevens. But, now, wait----
    Mr. Barksdale.--an emergency, we would have----
    Senator Stevens.--what do you do with it, if it's not used 
by public safety? Are you leasing it out?
    Mr. Barksdale. Yes, sir. We are leasing or selling that 
service. We operate a network--as opposed to previous people 
who put up money and tried to resell spectrum, we would 
actually operate a nationwide network. We will build it out in 
10 years, covering 99 percent of the population, we'll put the 
money up front for the auction----
    Senator Stevens. But where's the partnership, if you're 
operating it and you're selling it, you're getting money, and--
are you going to buy equipment for public safety?
    Mr. Barksdale. We are going to build the network. Public 
safety would----
    Senator Stevens. That's not what I asked, now. Are you 
going to buy equipment for public safety with the income from 
this public partnership?
    Mr. Barksdale. Which equipment?
    Senator Stevens. The equipment for them to go into--new 
equipment for interoperability.
    Mr. Barksdale. Well, there are two pieces. One is the 
network, the switching equipment. We build and--we buy that, 
yes, sir, every bit of it.
    Senator Stevens. I understand that. But they----
    Mr. Barksdale. Those handsets----
    Senator Stevens.--have a requirement for equipment to 
become interoperable--they have a requirement--public safety 
has enormous requirements. So, I want to see--and the Cyren 
Call said they would take some of their income and help public 
safety buy that equipment.
    Mr. Barksdale. This is not Cyren Call.
    Senator Stevens. I understand that. Are you going to buy 
the public----
    Mr. Barksdale. We're going to buy the network----
    Senator Stevens.--are you going to buy the public safety 
any equipment, Mr. Barksdale?
    Mr. Barksdale. Yes, sir, $12 billion worth of it, at least, 
which is the network that will be interoperable. They would 
have to provide their own handsets. They are certainly free to 
use different technologies that, in New York, might fit 
differently than others, but they would use this spectrum. We 
would put up at least the $12 billion to build the network--
from private funds, not from public funds--and then that would 
be an interoperable network, just like the cellular system 
works today. It's interoperable.
    Senator Stevens. We only have--each of us have just so much 
time. I'd really appreciate it----
    Mr. Barksdale. Yes.
    Senator Stevens.--if you'd answer my questions. I 
understand what you said before. I'm just asking you questions. 
All right?
    Mr. Barksdale. Yes.
    Senator Stevens. Now, what are the costs of this network. 
This network you wish to build out, what would be the cost of 
it?
    Mr. Barksdale. Approximately $12 billion.
    Senator Stevens. And where will that money come from?
    Mr. Barksdale. From private investors.
    Senator Stevens. It won't come from the leasing of the 
spectrum?
    Mr. Barksdale. Well, that's how you get the capital of the 
company from private investors. Then they would resell the use 
of this network to commercial users, to wholesale users, to 
innovators, and to others, who would pay by the minute for the 
service, and that would be the revenue stream that would pay 
for the long-term business.
    Senator Stevens. But other people at this auction are going 
to pay enormous sums of money for spectrum.
    Mr. Barksdale. Yes, sir.
    Senator Stevens. They will have the ability to build 
networks, too.
    Mr. Barksdale. Yes, sir.
    Senator Stevens. And those networks would be accessible by 
public safety people also, right?
    Mr. Barksdale. Not necessarily.
    Senator Stevens. Why not? They're just--anyone can access--
--
    Mr. Barksdale. Well, they're as accessible as they are 
today, but they're not built. As was pointed out by the 
gentleman from New York, this network will be built 
specifically to withstand some of the hardened requirements of 
public safety.
    Senator Stevens. I'm trying to understand the difference 
between Mr. Cosgrave and your position, as far as this network 
is concerned. I support getting public safety all the network 
and all the money we can possibly get them to provide an 
interoperable----
    Mr. Barksdale. Right.
    Senator Stevens.--system. Cyren Call led us to believe that 
the money that they would get from leasing the spectrum would 
be used for public safety. When we examined that, that wasn't 
quite the case.
    Mr. Barksdale. This proposal is not the Cyren Call 
proposal, has nothing to do with it.
    Senator Stevens. But what's the difference?
    Mr. Barksdale. On this proposal, we take the public safety 
spectrum and this other 10 MHz, put them together, build a 
network right down the middle, covering 99 percent of the 
people. Private interests build the network. We sell out the 
portions that public safety doesn't use. When public safety 
needs more for emergencies, they can absorb all of this 
commercial, through written agreements that are well in 
existence before this, so that they can expand the network. In 
a case of Hurricane Katrina or 9/11, they get all the spectrum. 
But most of the time, you don't have that; therefore, the 
spectrum lays fallow. We're submitting that we would be able to 
wholesale that spectrum to the people--to small cellular 
carriers who can't get national coverage, to innovators who 
can't get on AT&T or Verizon's system, as indicated in today's 
Wall Street Journal, the people who are willing to pay for it. 
That's the business risk we take. We're willing to take the 
risk. Others may bid higher than we, and they may get the 
spectrum. But that's the idea, that private interests would 
love to do this, and, as a great benefit to public safety, 
build it out.
    But, to Mr. Cosgrave's point, we're not requiring New York 
City to participate in this. It would be their option.
    Senator Stevens. Really, you know, I'm out of time already. 
I'm trying to get questions. Would you please just answer my 
question?
    Mr. Barksdale. Yes, sir.
    Senator Stevens. Now----
    Mr. Barksdale. I apologize.
    Senator Stevens.--we have--as I understand it, we have 84 
MHz before us, in terms of the total concept of what's going to 
be available after the digital change in 2008.
    Mr. Barksdale. I think that's correct.
    Senator Stevens. And if I understand it, the public safety 
has 24 MHz reserved already.
    Mr. Barksdale. Yes, sir.
    Senator Stevens. And you want to add 10 to that.
    Mr. Barksdale. Yes, sir.
    Senator Stevens. But you would take 12 MHz of the existing 
24 MHz, and that 10 MHz, and you would control it by this 
private partnership that you create. Now, this is a stock 
company, right?
    Mr. Barksdale. Yes, sir.
    Senator Stevens. Well, where's the partnership?
    Mr. Barksdale. Well, before we can get the bid, before we 
start, we have to have signed agreements, as Ms. McCarley said, 
with the public safety entity that we're proposing, which would 
be a public safety spectrum trust that has to be signed and 
agreed to. And that is the partnership. They're our principal 
customer. They would be treated--they would be our largest 
customer.
    Senator Stevens. You would be able to lease to them before 
all this demand of accessibility for the public safety comes, 
you'd be able to lease 34 MHz--well, you'll control 24--24 MHz 
to those who might otherwise bid for it at the public auction, 
right?
    Mr. Barksdale. Well, 10 of it to others, because public 
safety has already got 10.
    Senator Stevens. But you're going to control 12 from public 
safety, plus the 10 that you want----
    Mr. Barksdale. Yes, sir.
    Senator Stevens.--to be allocated to this----
    Mr. Barksdale. Yes, sir.
    Senator Stevens.--to Frontline.
    Mr. Barksdale. Yes, sir.
    Senator Stevens. You're not going to pay anything for that.
    Mr. Barksdale. We're going to pay whatever the bid price 
is, billions of dollars. It could cost 20, 40 billion dollars 
to pay for it.
    Senator Stevens. You're going to bid on the 10 MHz?
    Mr. Barksdale. Yes, sir. That's the whole point. We're not 
asking anybody to give us this spectrum. We're going to bid on 
it. There are others who are going to bid on it. And then, in 
addition, public safety gets the free ride of the network. 
That's a heck of a deal.
    Senator Stevens. Well, it is, if it really--and I see my 
light's on--it is, if the commitment is there to public safety.
    Mr. Barksdale. Of course.
    Senator Stevens. And I think----
    Mr. Barksdale. And only if that's true.
    Senator Stevens.--if part of this is leased out, how does 
public safety get it after it's leased out?
    Mr. Barksdale. Well, it's just like the network works 
today, sir, everybody participates, but some have higher 
priorities. Public safety would have the highest priority.
    Senator Stevens. All right. Well, then, the last question 
is, if it doesn't achieve the goal, how does FCC get control 
again?
    Mr. Barksdale. Well, that's part of the agreement that 
would have to be nailed down. We've made some suggestions on 
that subject, which I think would be acceptable. But the main 
thing is, we would have to put the money up front. That's 
different than any prior new entrant has had to do.
    Senator Stevens. I applaud the difference between that and 
Cyren Call, but I want to know, if it doesn't achieve its 
result, how do we get it back so it can be auctioned again, and 
that money applied, the money that's coming in, from----
    Mr. Barksdale. Yes, sir.
    Senator Stevens.--the auction is first dedicated to public 
safety. And----
    Mr. Barksdale. But a very small amount.
    Senator Stevens. Well, it's a billion dollars. Then we----
    Mr. Barksdale. That's not near enough, Senator.
    Senator Stevens. I understand that, but we had earmarked 
some money to repay money we previously put up, then it comes 
back and it----
    Mr. Barksdale. Yes, sir.
    Senator Stevens.--deals with public safety again.
    Mr. Barksdale. Correct.
    Senator Stevens. So, if it brings in the kind of money that 
we think it's going to bring in. It's going to be a tremendous 
amount. Yours will be bid as part of the total of the 50 MHz 
that's--no, the 60 MHz available now? You're going to be in 
competitive bid for up to 10 MHz, is that what you're telling 
me?
    Mr. Barksdale. Yes, sir. A portion of that 60 MHz--10 MHz 
of it.
    Senator Stevens. Who do you compete with on that?
    Mr. Barksdale. People who buy spectrum to build out 
networks--AT&T, Verizon, anybody who wants to step up, private 
investors, public investors.
    Senator Stevens. Well, I'm taking too much time. I'll have 
some more questions, but I do apologize. In terms of the 
concept that you're going to be part of the----
    Senator Dorgan. Could I ask him to yield----
    Senator Stevens.--auction.
    Mr. Barksdale. Yes, sir.
    Senator Stevens. And you're going to go in and bid for 10 
MHz.
    Mr. Barksdale. Yes, sir.
    Senator Stevens. If you don't get it, this doesn't work. If 
someone----
    Mr. Barksdale. No, somebody else will get it. We ask that 
the FCC set it aside for this purpose--public safety----
    Senator Stevens. All right. Well----
    Mr. Barksdale.--and combined with----
    Senator Stevens.--if it's not in----
    Mr. Barksdale.--their other.
    Senator Stevens.--the public auction----
    Mr. Barksdale. And if they do that, somebody will bid on 
it. If they--if nobody bids on it, it goes back into the----
    Senator Stevens. Well, they can only bid on it to compete 
with you within your plan, right?
    Mr. Barksdale. Only bid on it--I didn't understand the 
question.
    Senator Stevens. You want 10 MHz set aside to----
    Mr. Barksdale. Yes.
    Senator Stevens.--join the 12----
    Mr. Barksdale. Yes, sir.
    Senator Stevens.--and----
    Mr. Barksdale. Exactly.
    Senator Stevens.--you can bid on that.
    Mr. Barksdale. Yes, sir.
    Senator Stevens. But for the purpose outlined in your 
Frontline proposal.
    Mr. Barksdale. And contractually agreed to with the 
representatives of the public safety community and the FCC in 
the United States.
    Senator Stevens. But the people that are competing with you 
have to agree with your plan on that 10 MHz.
    Mr. Barksdale. For that 10 MHz, whoever competes with us 
would have to agree to that plan, yes, sir.
    Senator Dorgan. Senator Stevens, could--would you yield 
just for----
    Senator Stevens. Yes. I'm sorry to take so much time. I had 
a problem with Cyren Call, and----
    Senator Dorgan. I understand.
    Senator Stevens.--I'm developing another problem with this, 
I want you to know.
    [Laughter.]
    Mr. Barksdale. Please don't pick on me because of Cyren 
Call. This has nothing to do with that.
    [Laughter.]
    Senator Dorgan. But if you would yield just for----
    Mr. Barksdale. This was a gift.
    Senator Dorgan.--so that I can understand the point. I 
appreciate the questions you've asked.
    Is it a business model that says you will go out and bid 
on, and hopefully achieve, the 10 MHz, and you'll pay for that, 
and then you block that with the 12 MHz that's public safety. 
You----
    Mr. Barksdale. Yes.
    Senator Dorgan. You will not be paying for that. And that--
--
    Senator Stevens. Well, he's just said he wants 10 MHz set 
aside----
    Mr. Barksdale. Right.
    Senator Stevens.--to comply with his plan, and anyone else 
can compete and bid to fulfill that plan----
    Senator Lautenberg. There is an order here, Mr. Chairman.
    Senator Stevens.--fulfill that plan. But it's not to 
compete--to go and have a nationwide plan that would include 
service to public safety.
    Senator Lautenberg. I've been waiting a long time.
    Senator Stevens. Thank you. I'm sorry.
    The Chairman. Senator Lautenberg?
    Senator Lautenberg. Mr. Chairman, there are fairly 
complicated issues here, and----
    Senator Stevens. Yes.
    Senator Lautenberg.--and I really do think it's hard to 
thread through, with the volume of testimony, and then the 
things that we'd like to know more about.
    I'm going to focus on Mr. Cosgrave, because we're 
neighboring States, and we both shared very significantly in 
the tragedy of 9/11, and saw what happened when police 
departments couldn't communicate with fire departments. It 
compounded that tragedy by a major factor. It just was very 
painful throughout. It has been, even in the later years.
    So, now, New York City is in the process of--is your 
interoperability requirement fully met, at this time?
    Mr. Cosgrave. Well, we've certainly--in New York City, have 
made significant progress since 9/11. Commissioner Kelly and 
Commissioner Scapetta would certainly tell you, if they were 
here, that they feel the police department and fire department, 
respectively, have much better communications today, and that 
they are, in fact, capable of being interoperable.
    You know, there's a lot of confusion on this whole question 
of interoperability. Fire departments--first responder 
organizations, fire departments, police departments, are, in 
effect, paramilitary organizations, and they run with a chain 
of command. And you don't want every fireman to be able to talk 
to every policeman. So, this notion of interoperability being, 
sort of, everybody's got to talk to everybody, is a false 
notion, to start with. What----
    Senator Lautenberg. But----
    Mr. Cosgrave.--you want to do is have the chains of command 
be able to talk, and we certainly can effect that today very 
effectively.
    Senator Lautenberg. So, today, that part of the process----
    Mr. Cosgrave. Absolutely.
    Senator Lautenberg.--is complete. All right. Now, how about 
the same question related to communities, let's say, in New 
Jersey. We're, after all, part of the same metropolitan area. 
So, has New York City addressed that part of the question?
    Mr. Cosgrave. We work together, we have committees that----
    Senator Lautenberg. Professor Weiser's shaking----
    [Laughter.]
    Mr. Cosgrave. Yes, I noticed, as I looked at the right 
side, here. We work together, we have committees that do that. 
But I would agree with Professor Weiser's negative nod that 
it's not where it needs to be.
    Senator Lautenberg. OK. So, then the objective of a 
nationwide service is still the right way to go, because if we 
can't, across our river, be clear in which fire department, 
which police department, which boats, et cetera, are operating 
to respond to----
    Mr. Cosgrave. There's no question about that. And the need 
for capital to build the infrastructure to allow this is a very 
real point. Clearly, New York City, recognizing the need, and 
Washington, D.C., recognizing the need, were able to raise the 
capital. But I understand the problem that other areas have----
    Senator Lautenberg. Yes.
    Mr. Cosgrave.--where they, maybe, don't have the resources 
to raise the capital. So----
    Senator Lautenberg. That----
    Mr. Cosgrave.--absolutely, the financing of this is a 
major, major issue.
    Senator Lautenberg. Yes. And that will be a problem 
throughout the country. I mean, we're----
    Mr. Cosgrave. Correct.
    Senator Lautenberg.--especially areas that are close to one 
another, and metropolitan areas, across a river, across a 
boundary.
    Mr. Barksdale, I just want to be sure that I heard 
something correctly that you said, and that was that safety--
did I hear you say--would get a free ride--public safety would 
get a free ride?
    Mr. Barksdale. Public safety would not have to pay for the 
$12 billion network that we would build nationwide, that they 
could use; that is--that would be built out. It is certainly 
our intention that we would make it available. But, for 
example, in New York, if they already have a system, they don't 
want to participate, they don't have to participate.
    Senator Lautenberg. Right. But I think that the suggestion 
that safety gets a free ride----
    Mr. Barksdale. Well, let me put it this way----
    Senator Lautenberg.--people probably applaud that one.
    Mr. Barksdale. Well, they ought to. The Wall Street Journal 
said, ``This would lower the auction price if they compromise 
it with this public safety thing.'' What they forgot is the $12 
billion to build the network, that we all dream of for the 
future, is going to be paid for by the same taxpayers, whether 
they're State, local, or Federal. Add that to the auction 
price, and it is a terrific deal for the government, for the 
taxpayers. They will spend less money on our proposal than any 
other proposal entertained.
    And I couldn't disagree more with this Cyren Call thing. It 
requires no legislation. We participate in the auction. It has 
nothing to do with that sort of proposal.
    This is a great deal for public safety. Does it solve 
everything? Heck no. There are a lot of things public safety 
has to do. But it would allow them to focus on those important 
issues without worrying about this nationwide network, which 
will be a godsend for them. This is what the Governors reported 
in Mississippi--we begged people to come in and do this after 
Katrina.
    Senator Lautenberg. Well, since the threat of attack, the 
threat of a major catastrophe still looms large, we're going to 
have to spend some portion of our annual budget in these areas, 
because we spend $3 billion a week on the war that we're 
presently in, and with supplementals boosting that. So, we pay 
for the things that we want to get done. And----
    Mr. Barksdale. Yes, sir, but one other thing----
    Senator Lautenberg. And the protection of the public, right 
now, is uppermost. When I see--and I have a responsibility for 
safety and security in transportation, harbors, and so forth, 
as a Chairman of the Subcommittee, and I see that--how 
pitifully small the budgeting is for these things, and yet, we 
find other ways to put money into programs that we question 
very sharply.
    Thanks, Mr. Chairman. Thank you all.
    The Chairman. Thank you very much.
    Senator Smith?
    Senator Smith. Mr. Barksdale, if I understand your model, 
the 10 MHz you're going to add so that there's private money to 
build out, what would then be available to the public----
    Mr. Barksdale. Yes, sir.
    Senator Smith.--it would be leased--the 10 MHz would be 
leased commercially, but those leases would be subject to the 
call of public safety.
    Mr. Barksdale. Yes, sir.
    Senator Smith. Who would trigger that requirement?
    Mr. Barksdale. Well, the agreement that would be specified 
between whoever wins the auction and the public safety spectrum 
trust.
    Senator Smith. And without the involvement of public or 
private money, the point you've made, and the point I made in 
my opening statement, is that there just isn't going to be the 
money to build this out.
    Mr. Barksdale. No, sir, they won't be built. The networks 
won't be built.
    Senator Smith. OK.
    I wonder, Mr. Weiser----
    Mr. Barksdale. Now--some will, now. Obviously, New York, 
Washington, some others. But nobody else is building them right 
now.
    Senator Smith. But your point is, it won't be built on a 
national-enough scale.
    Mr. Barksdale. No way.
    Senator Smith. OK.
    Mr. Weiser, if adopted, the Frontline proposal would impose 
many requirements on the ``E Block'' license.
    Mr. Weiser. Right.
    Senator Smith. What do you think would be the impact on the 
amount of money the auction participants would be willing to 
pay for the ``E Block'' license licensee if they were--if 
requirements are proposed?
    Mr. Weiser. It would probably be less. It's hard to say 
exactly how much, but the encumbered requirement of serving 
public safety, as Mr. Barksdale has outlined, is a fairly 
demanding responsibility. There is some opportunity that comes 
with it, which is to work with public safety and to use the 12 
MHz of the national public safety licensee. So, that is some 
offsetting benefit. But, on net, I would imagine it would be 
less than otherwise would be obtained.
    Senator Smith. If these regulations that Frontline's 
proposed were adopted in a general rulemaking that applied to 
all wireless now--or should they be applied to all broadband 
providers, in your view?
    Mr. Weiser. Sir, there are different sorts of regulations 
that are at issue. One is the requirement to serve public 
safety. That's the principal one. And that one, I think, is 
best done in a focused manner, because public safety has 
particular needs, and it needs to be done in a coordinated 
fashion. So, I don't think it--that would work effectively 
across the board.
    Senator Smith. So, you don't think the FCC should be 
adopting rules for certain providers that do not apply to 
others.
    Mr. Weiser. I wouldn't necessarily say it that way. I think 
that, you know, in the context of auction, this proposal has a 
particular goal in mind, to serve public safety with one part 
of the spectrum, and I think, as I believe Senator Inouye said 
at the beginning, the only goal shouldn't simply be to maximize 
the amount of auction revenue. This is a proposal that could, 
you know, provide the rollout of the next-generation network. 
And I think that is a proposal that, although a risk, can be 
managed, and can facilitate some good benefits.
    Senator Smith. Thank you, Mr. Chairman.
    Senator Stevens. Could you ask him one--if you would 
yield----
    Do you perceive competition to bid on that 10 MHz, based on 
this plan that's prepared, by Frontline?
    Mr. Weiser. Sir, I do think there can, and should, be 
competition. I will say----
    Senator Stevens. Wait, wait. From whom?
    Mr. Weiser. Sir----
    Senator Stevens. Who would compete with Frontline?
    Mr. Weiser. Sir, I think there could be a number of 
providers out there who would see this opportunity. The 
opportunity is to build a next-generation network, from the 
ground up, with public safety as an anchor tenant, and have the 
option not only for that 10 MHz, but to partner with public 
safety for an additional 12 MHz. So, I do think Frontline will 
not be the only bidder who would come forward. And they'll have 
to compete at auction to win this license.
    Senator Smith. But that's where the competition occurs, is 
at the auction. No other place.
    Senator Stevens. Who's going to bid to compete with him and 
his plan?
    Mr. Weiser. Sir, there are a lot of companies out there who 
could bid. Now, I will say one thing, which I explain in my 
testimony. The requirement to serve this participation spectrum 
with an open-access requirement might limit some bidders. And, 
although I understand the rationale behind that, I don't know 
that it necessarily helps public safety, per se. So, that could 
be limiting the bidding. But, even with that, I still think 
there are going to be others who will come forward. This is an 
opportunity; and for great entrepreneurs, like Mr. Barksdale, 
they'll see it, and they'll try to seize it.
    Senator Smith. Thank you, Mr. Chairman.
    The Chairman. Senator Dorgan?

              STATEMENT OF HON. BYRON L. DORGAN, 
                 U.S. SENATOR FROM NORTH DAKOTA

    Senator Dorgan. Mr. Chairman, thank you very much.
    I think it's safe to say this is beachfront property, and 
it's very valuable, will be auctioned once, by and large, and 
establish policy choices for our country for the long period. I 
want to try to understand, based on Senator Stevens' question, 
exactly the construct.
    Mr. Barksdale, my understanding is this--and correct me if 
I'm wrong. You would propose to take 12 MHz that is reserved 
for public safety, combine it with the purchase, in auction--
presumably a winning bid in auction--of 10 MHz, and have a 22 
MHz system. You don't pay for the 12 MHz. You do pay for the 10 
MHz. Is that correct?
    Mr. Barksdale. Actually, it's--the 12 MHz becomes 10 MHz, 
because 2 MHz are guard bands and are not----
    Senator Dorgan. Right.
    Mr. Barksdale.--usable. So, it's really 20 MHz, yes, sir, 
10 MHz of which would be public safety's part, 10 MHz of which 
we would bid at auction. Yes, sir.
    Senator Dorgan. OK, 10 MHz of which you purchase at 
auction. You take the public safety piece, 12 MHz--or 10 MHz. 
You don't pay for that. And then you have 22 MHz, and from 
that, you build out a system and use it commercially, with a 
caveat that the public safety is going to have certain 
preferential rights and so on.
    So, I think I understand that. Now, the question is, at 
what price do you lease back that system to public safety? Or 
does public safety access that without cost?
    Mr. Barksdale. No, sir, public safety would agree to a 
lease price, based on usage, that would be part of this 
agreement, agreed to by the public safety spectrum trust----
    Senator Dorgan. And you're leasing back----
    Mr. Barksdale.--over time.
    Senator Dorgan.--you're leasing back to the public safety 
use, that those that would use it for revenue for your for-
profit enterprise, and the reason that you're extracting 
revenue from them, even though it was their spectrum, is 
because you spent $10 billion creating the infrastructure----
    Mr. Barksdale. Correct.
    Senator Dorgan.--that allows the system to exist. All 
right. I think I now understand what it is you're doing. I 
suspect that if the FCC sets aside the 10 MHz, I suspect that 
there's less value to it, because you have fewer bidders. So, I 
don't know what that ``less value'' is, but I think that's one 
of the questions that Senator Smith was asking. What ``less 
value'' will we have? Now, you might say, ``We'll gain value on 
the other side, to the extent that we have an interoperable 
network nationally to be used by public safety.''
    Mr. Barksdale. Right.
    Senator Dorgan. So, you have one consideration of how much 
less revenue with fewer bidders for the 10 MHz, number one.
    Number two, what is the cost to public safety, and will 
they be able to afford it? And under what conditions will you 
be restricted in determining reasonable cost, as opposed to 
saying to the folks in Fargo, North Dakota, ``Look, here's the 
system, we built it, here's what we charge. If you don't like 
the charge, tough luck.'' You'll be the only system out there, 
so you'll have a substantial amount of power with respect to 
what you decide to charge public safety. Is that covered in the 
contractual relationship----
    Mr. Barksdale. Yes, sir, it would be. And, obviously, as 
the anchor tenant would--of any development, the anchor tenant 
gets a better deal than anybody else, and would be probably 
based on the cost of the system as deployed, and not a retail 
price. It would probably be based on a very favorable deal. We 
understand an obligation to public safety.
    As to your first question, the taxpayer is benefited, 
because the taxpayer gets the auction money, plus they don't 
have to pay for the network. They're the same taxpayers. So, 
you add the two together, and that's the value of the auction.
    To the third part of your question, I think that it is 
vitally important that the agreement that--whoever wins the 
agreement, that they sign with the public safety trust, that it 
be a good, well-thought-out, agreed-to proposition that is in 
favor, on most--in most every area, toward public safety and 
not toward the commercial interest.
    Senator Dorgan. Mr. Barksdale----
    Mr. Barksdale. But there has to be a written agreement, 
yes, sir.
    Senator Dorgan. Mr. Barksdale, you made the point about it 
increasing concentration, I should say, in all of these areas, 
and that's a point that I'm concerned about. I did read The 
Wall Street Journal piece that you referred to, and I think it 
raises, also, policy questions.
    I'd like to ask, with respect to the commercial side of 
your business, because--you're doing this because you're 
creating a commercial national network, and you're using the 
public----
    Mr. Barksdale. Right.
    Senator Dorgan.--safety piece in order to create a 
commercial national network that'll have private sector 
investors, it'll have stockholders and so on.
    Mr. Barksdale. Yes.
    Senator Dorgan. And so, it's a profit-motive system, and 
with respect to that piece of what you're doing, I'd like to 
ask your intentions with respect to the issue of open access, 
for example, as a policy matter.
    Mr. Barksdale. It is our intention that it be an open-
access system.
    Senator Dorgan. And how would you provide that guarantee to 
the FCC and to the Congress?
    Mr. Barksdale. That there are certain--there are about 
three or four requirements of what ``open access'' means. And 
that would be identified in our agreement with the FCC. It's 
part of the rules--it would be part--hopefully, part of the 
rulemaking that the FCC will provide, here in the next few 
weeks, that will drive the auction, because it needs to be 
identified. ``Open access,'' to some means something different 
than ``open access'' to others.
    Senator Dorgan. Well, it does, and it's a particularly 
important policy choice, at this point, given--I mean, you 
reference it in your----
    Mr. Barksdale. Yes.
    Senator Dorgan.--testimony, and show us The Wall Street 
Journal article of this morning.
    Mr. Barksdale. Right.
    Senator Dorgan. The other that will cause an apoplectic 
seizure here on the Committee whenever I mention it is the 
issue of network neutrality. We've had some pretty aggressive 
discussions on this Committee about the policy of network 
neutrality.
    Have you taken a look at those discussions? And how do you 
see your commercial enterprise with respect to those issues? 
Because we've had some suggest that they'd like to be 
gatekeepers.
    Mr. Barksdale. Right. Well, I'm not an expert on net 
neutrality. I'll give you a written response.
    But, in general, all of this service will be wholesaled, 
other than that provided to public safety, which will be, 
basically, at cost. And the wholesale purchaser of this can run 
it however they choose to run it. If it's open access, they can 
use whatever technology they want to run. So, the issue of net 
neutrality, it seems to me, is a lot less on a system like this 
than it is for an ingrained incumbent carrier.
    Senator Dorgan. And, finally, you indicated that your 
service would cover 99 percent of the country. One hopes that 
the 1 percent isn't in Hettinger County, North Dakota, or----
    [Laughter.]
    Senator Dorgan.--similar area. You were careful to point 
out that----
    Mr. Barksdale. Senator, I can assure you----
    Senator Dorgan.--you cover Hawaii and----
    Mr. Barksdale.--it won't----
    Senator Dorgan.--Alaska.
    [Laughter.]
    Mr. Barksdale. I guarantee it won't be.
    [Laughter.]
    Senator Dorgan. Mr. Chairman, thank you. I think, you know, 
these questions are really interesting and important, and I 
think we're understanding much more about these policy choices. 
Thank you very much.
    And I thank the rest of the witnesses, as well.
    Senator Stevens. Mr. Chairman, just one comment, if I may.
    Senator Inouye and I battled for two Congresses to get the 
right to auction spectrum, to start with. And we earmarked, in 
existing law, the first billion dollars for public safety. I 
think we should amend the existing law and increase it to, say, 
$5 billion, whatever is required, to build out the public 
safety needs, and let the spectrum continue to be auctioned on 
the basis of who will pay to get a system. They're all going to 
build out broadband. As a practical matter, this is the new 
broadband frequencies that we're talking about. As I understand 
it, there will be broadband built out.
    Mr. Barksdale. Right.
    Senator Stevens. And what the public safety really needs is 
the money to organize and do what New York has tried to do, but 
they haven't had enough money to even complete there, right, 
Mr. Cosgrave I said I wouldn't ask you any questions. But----
    [Laughter.]
    Senator Stevens.--the concept we have here, as far as I'm 
concerned, is splitting off from our original concept that 
we're going to auction all this spectrum. This 10 MHz would be 
auctioned only to people who would comply with the Frontline 
plan, and I think that will lower the value of it, and will 
lower the value of the other spectrum. Much better to raise the 
value of it all and let public safety have what they need now, 
and depend upon the Treasury for the future. We could give them 
as much as $5 billion out of this one, I'm sure. The original 
bid was estimated to bring in, what, $250 million. Did you know 
that? It brought in $18 billion.
    Mr. Barksdale. I was a bidder.
    Senator Stevens. I hope you were successful--you were 
successful, yes.
    Mr. Barksdale. Yes, sir.
    Senator Stevens. You profited very greatly off of it, as I 
understand, and I congratulate you for that. There's no reason 
why this should not go into the private sector and be 
profitable, too. And future income from all of that will assist 
the development beyond what we could do with the initial bid.
    So, I'm going to look at increasing the allocation to 
public safety on the original bid.
    Mr. Barksdale. All I'm saying is, it'll take a lot more 
than $5 billion.
    Senator Stevens. I agree. But $5 billion for the first 
initial part of it, that would cover at least 4 or 5 years.
    Thank you.
    The Chairman. Thank you.
    Senator Thune?
    Senator Thune. Thank you, Mr. Chairman.
    I appreciate you holding the hearing. I don't have any 
questions for this panel. I'll wait until we--let you get the 
next panel started.
    Thanks.
    The Chairman. It is obvious that the issue of the proposal 
submitted by Frontline will be the determining factor in the 
outcome of this measure. And this measure, this part, concerns 
first responders and public safety officials. And we haven't 
heard from them.
    So, Ms. McCarley, what do you think of this proposal of 
Frontline?
    Ms. McCarley. Thank you, Chairman Inouye.
    The Frontline proposal is very interesting, and it's very 
innovative, and it points us in a direction that I think leads 
us to a solution.
    Now, a thing, I think, that needs to be stressed more fully 
here is that a critical component is the public safety trust, 
and what public safety would suggest to you is, through that 
trust, both the public safety spectrum and the commercial 
spectrum could be combined to create a system, a broadband 
system, with control, leaving that in control of public safety 
agencies through the trust. And we have even explored how we 
would put that trust together. And, you know, we would suggest 
that ownership would be public safety. It would be 
representative of public safety, under the advisement of public 
safety, and under the control of public safety at all times. 
Many of the issues that have been put on the table here could 
be solved by a strong single licensee, if you will, who could 
negotiate a very good contract.
    So, I think we've heard some very interesting dialogue 
here, and it reinforces, even more, the principle that we need 
a very strong single licensee to address the issues.
    The Chairman. Well, I'd like to thank the panel.
    Mr. Barksdale, you should get time-and-a-half for your 
performance here.
    [Laughter.]
    The Chairman. And, if I may, I'd like to submit my 
questions to you, and would look forward to receiving your 
response.
    Thank you very much.
    Our next panel consists of the Executive Vice President and 
Chief Technical Officer of Verizon Wireless, Mr. Dick Lynch; 
the Chief Executive Officer, Centennial Communications 
Corporation, Mr. Michael Small; and the Chief Executive Officer 
of Txtbl, Dr. Amol R. Sarva.
    May I call upon Mr. Lynch.

         STATEMENT OF RICHARD J. LYNCH, EXECUTIVE VICE 
    PRESIDENT AND CHIEF TECHNICAL OFFICER, VERIZON WIRELESS

    Mr. Lynch. Yes, thank you, Senator.
    Good morning to you, Chairman Inouye and Co-Chairman 
Stevens, and members of the Committee.
    It's a privilege to be with you this morning to discuss the 
700 MHz auction. Thank you for affording me this opportunity to 
share with you the views of Verizon Wireless on this, 
obviously, very important topic.
    Congress, the Administration, and the FCC have all declared 
that the deployment of broadband services to the American 
public is a critical goal. The auction has the potential to 
make a major contribution to delivering the benefits of 
broadband to consumers and businesses, while helping to sustain 
America's leadership in the world economy. However, I did use 
the word ``potential,'' because to achieve these benefits, the 
auction must make the spectrum available in ways that will 
promote, not cripple, broadband deployment. My years of 
experience in building wireless networks tell me that the 700 
MHz auction can unlock even more benefits, but only if it's 
done correctly.
    I'd like to discuss what I see as two critical actions that 
the FCC should take to help deliver on the 700 MHz promise for 
broadband.
    First, the FCC should adopt a band plan that will enable 
rapid deployment of next-generation wireless broadband 
networks.
    Second, the FCC should decline to impose eligibility, 
wholesale, open access, or net neutrality requirements on the 
band. Those requirements are unwarranted, would deter 
innovation, and would not benefit consumers.
    The upcoming auction will enable the development and 
deployment of new fourth-generation, or 4G, wireless 
technologies and set in place the platform for services that 
will yield tremendous benefits to consumers, businesses, and 
first responders, alike.
    Verizon Wireless believes firmly in the broadband future, 
as envisioned by Congress, the FCC, and the Administration. We 
have spent billions of dollars over the past several years to 
deploy wireless broadband across this Nation. The FCC has 
offered a variety of band plans for auctioning the 700 MHz 
spectrum.
    Verizon Wireless supports FCC proposal number 3, with 
regional licenses in the upper band. We believe that this plan 
is the only one that meets the government's goals for this 
spectrum. It would make available a wide variety of licenses to 
meet varying bidders' needs, including a 20 MHz spectrum block 
that will enable very high data speeds for broadband. It would 
also include public safety's need for spectrum alignment along 
the Canadian border.
    Now, let me talk for a minute about open access and net 
neutrality. These terms have been subject to much discussion, 
but, I'd submit, with little or no real specificity.
    Frontline offers some vague requirements that the licensee 
must permit a wireless device to connect to the network, and 
that the licensee operates solely as a wholesale service 
provider. Many public safety agencies have raised doubts about 
how much such open-access requirements would impact them. And, 
as an operator, I can tell you I have similar concerns. 
Saddling the spectrum with these open access obligations would 
reduce interest in the spectrum at auction, positioning 
Frontline to acquire the spectrum at a price substantially 
below market value.
    I have similar concerns about a net neutrality mandate, as 
I do open access. Generally, proponents of the concept focus on 
issues involving traffic routing and management. If what the 
proponents are talking about are the rights of users to access 
the public Internet, and access applications of their choice, 
wireless customers can already do that. If, however, they want 
to preclude wireless carriers from offering their own value-
added products and services, then I disagree.
    The reliability of our wireless network and its ability to 
serve over 60 million customers, including hundreds of 
thousands of public safety users, is directly tied to our 
ability to manage the devices, ensuring that they do not 
monopolize all available capacity, block other users, or allow 
spam and viruses to invade the network. Open access and net 
neutrality regulations would strip away our ability to manage 
our network for the benefit of all of our customers.
    So, in conclusion, Verizon Wireless urges the 700 MHz 
auction be held as soon as possible, utilizing proposed band 
plan 3, and without rules that would foreclose bidders or 
impose unfounded and ill-advised requirements.
    And, if I might add, Senator Stevens, I believe you focused 
us, this morning, on a very important issue. Focusing on the 
dollars necessary to equip public safety at the terminal end, 
as well as the network end, is a very significant part of what 
public safety really needs. And I think one clear way to do 
that is to maximize the auction proceeds that we could achieve 
with this auction.
    With that, I'd like to thank you for the opportunity to 
appear today, and look forward to your questions.
    Thank you.
    [The prepared statement of Mr. Lynch follows:]

 Prepared Statement of Richard J. Lynch, Executive Vice President and 
               Chief Technical Officer, Verizon Wireless
    Good morning, Chairman Inouye, Co-Chairman Stevens, and members of 
the Committee. It is a privilege to be with you this morning to discuss 
``The 700 MHz Auction: Public Safety and Competition Issues.'' Thank 
you for affording me this opportunity to share with you the views of 
Verizon Wireless on this important topic.
Introduction and Summary
    Congress, the Administration and the FCC have all declared that the 
deployment of broadband services to the American public is a critical 
goal. The 700 MHz auction has the potential to make a major 
contribution to expanding broadband and to delivering the many benefits 
of broadband to consumers, businesses, and America's leadership in the 
world economy. I say, however, the potential--because to achieve these 
benefits, the auction needs to make the spectrum available in ways that 
will promote, not cripple, broadband. My years of experience in 
building wireless networks tells me that the 700 MHz auction can unlock 
even more benefits--but only if it's done right.
    I thus want to discuss what I see as two critical actions the FCC 
should take to help deliver on 700 MHz's promise for broadband.
    First, the FCC should adopt a band plan for 700 MHz that will 
enable rapid deployment of next generation wireless broadband networks.
    Second, the FCC should not impose eligibility, wholesale, open 
access or net neutrality requirements on the 700 MHz band. Those 
requirements are unwarranted, would deter innovation, and would not 
benefit consumers.
The 700 MHz Band Plan Should Promote Broadband Deployment While Making 
        Available a Mix of License Sizes, and FCC Proposal 3 Does That
    The upcoming auction will enable the development and wide 
deployment of new fourth generation--or ``4G''--wireless technologies 
and services that will yield tremendous benefits to consumers, 
businesses, and first responders alike.
    In 1997, when Congress adopted the DTV transition plan, wireless 
data services were very limited--typically providing only about 15-20 
kilobits per second. Today, broadband wireless technologies like CDMA 
EV-DO have been widely deployed, supporting data rates of hundreds of 
kilobits per second and a wide variety of mobile applications. Verizon 
Wireless' mobile broadband network, the first in the nation, is 
available to more than 200 million people who can access broadband 
services on their laptops, e-mail on their PDAs, and V-CAST Video and 
Music on their wireless phones. We are now deploying the latest 
enhancement to CDMA technology, EV-DO Revision A, which will increase 
data speeds further and support new broadband applications.
    New ``4G'' technologies are being developed that will support 
mobile data rates of tens of megabits per second. They will unleash a 
host of new broadband applications that will rival anything available 
today on wired broadband networks. Doctors will be able to access 
medical records and CAT scans wirelessly; firefighters will have 
wireless access to images of building interiors and floor plans. These 
wireless broadband technologies promise to improve the lives of 
American citizens in many ways.
    Verizon Wireless believes firmly in the broadband future envisioned 
by Congress, the FCC and the Administration. We have spent billions of 
dollars over the past several years to bring wireless broadband to the 
nation, participating in spectrum auctions and investing many billions 
more on technology and infrastructure. We believe we are the most 
efficient spectrum user in the nation--and perhaps the world--and proud 
of it. We serve more customers with less spectrum than any other 
operator.
    However, the ability of Verizon Wireless--and the entire industry--
to continue to deliver on this broadband vision requires access to 
additional spectrum, auction rules that are open and competitive, and 
service rules that are flexible and market-based. The 700 MHz spectrum 
will enable qualified and committed operators to make a real difference 
in expanding the reach of broadband services, if it is auctioned in 
ways that will facilitate, not hamper, deployment of those new 4G 
technologies.
    The FCC has offered a variety of band plans for auctioning the 700 
MHz spectrum. Verizon Wireless supports FCC Proposal 3, with regional 
licenses in the upper band. A copy of this band plan is attached to my 
testimony. We believe this plan is the only one that meets the 
government's goals for this spectrum.

   By using regional area licenses in the upper band, coupled 
        with smaller area licenses in the lower band, it makes 
        available the right mix of license sizes and creates 
        opportunities for a variety of applicants, business plans, and 
        technologies. More than 900 licenses would be available for 
        auction.

   It provides adequate contiguous spectrum--22 MHz--to support 
        very high data speeds for 4G broadband deployment.

   It accommodates public safety's need for useable narrowband 
        spectrum along the Canadian border.

    Let me elaborate on why this band plan should be adopted. First, it 
is important to keep in mind that the entire 700 MHz commercial band 
should be considered as a whole. With the DTV transition, Congress 
provided a total of 84 MHz of new commercial spectrum, including 24 MHz 
that has already been auctioned. This leaves 60 MHz--30 MHz in each of 
the upper and lower bands--left to be auctioned. Thanks to technical 
rules the FCC already put in place, both bands are well suited for 
mobile broadband services. Any band plan should reflect what has 
already been auctioned.
    Second, we agree with the FCC that the 700 MHz band should include 
a mix of different license sizes. The FCC has already achieved part of 
that goal by licensing a significant amount of 700 MHz spectrum in the 
lower band in small blocks to smaller wireless companies, and it plans 
to license all remaining ``paired'' spectrum in the lower band based on 
smaller markets, including another 700-plus licenses in the smallest 
areas, cellular market areas, which can be as small as one county. The 
lower band will thus provide 36 MHz of spectrum licensed on a small 
market basis, providing ample opportunities for smaller carriers.
    What the FCC has not done to date is to auction larger 700 MHz 
licenses. It can accomplish this by including a 20 MHz paired block of 
spectrum, to be licensed across wide geographical areas, such as the 
Regional Economic Area Groupings (REAGs) used by the FCC in last year's 
auctions for the Advanced Wireless Services (``AWS''). This band plan 
will help ensure the near-term deployment of next generation wireless 
broadband networks and to provide the best opportunity for the United 
States to lead the world in 4G wireless development and deployment.
    A contiguous 20 MHz block is important because it will encourage 
optimized use of that spectrum for 4G technologies and the services it 
can provide. It is essential that the 700 MHz band plan include at 
least one spectrum block of at least 20 MHz in total bandwidth, as it 
did in the band plans for cellular, PCS and AWS.
    Larger regional licenses such as REAGs are important because, for 
over a decade now, we have witnessed the benefits of wide area licenses 
in promoting nationwide deployment of new technologies. Consumers 
demand nationwide service and carriers must meet that demand. History 
has shown, almost without exception, that smaller-sized licenses wind 
up becoming aggregated so that carriers can achieve economies of scope 
and scale and operate as viable businesses, enabling them to compete 
and deliver better products at lower prices to consumers. Aggregating 
spectrum post auction takes many years and is expensive to carriers and 
costly to consumers. If Congress wants next generation wireless 
networks to be a near-term reality, the FCC must auction and license 
sufficient spectrum on a REAG basis.
The 700 MHz Rules Should Provide Spectrum Opportunity for All Without 
        Unjustified Constraints That Will Undermine Innovation and Harm 
        Consumers
    Beyond questions of technology lies the critical need to maintain 
integrity in the auction process. The Commission should set auction 
rules that allow for full and fair competition by qualified bidders, 
without artificial and unwarranted constraints.
    Spectrum auctions for commercial spectrum licenses have been one of 
the great success stories of communications policy. Over the past 10 
years, these auctions have raised many billions of dollars for the U.S. 
Treasury and accelerated the roll-out of new and innovative services 
for consumers. The resulting competition in the mobile marketplace has 
provided a broad range of digital offerings, extensive coverage,Email 
high quality, and low prices. In short, competitive spectrum auctions 
have been a good deal for American consumers. The government should not 
depart from that success.
    1. Auction Eligibility Restrictions. Some parties have sought to 
game the auction process by proposing to exclude or restrict local 
exchange carriers, cable operators, and wireless carriers from 
eligibility for licenses in the 700 MHz band. Such discriminatory 
eligibility restrictions are aimed at the companies most ready to 
deploy next generation broadband networks. Restricting participation 
would depress revenues needed by the Treasury, and delay introduction 
of new services.
    The FCC has repeatedly found that open competitive bidding will 
ensure that scarce, valuable spectrum resources are put to the highest 
and best use. Restricting bidding to a limited class of entities 
strongly suggests that the license may not be granted to the highest 
and best use. It increases the risk that spectrum would go to entities 
incapable of putting it to timely, effective use. The Commission should 
maintain its policy of rejecting all calls for closed bidding.
    Restricting eligibility would unquestionably reduce the economic 
benefits of the auction. Proceeds from the 700 MHz auction will fund 
multiple programs for the DTV transition and the deployment of 
interoperable communications systems for public safety. By limiting 
eligibility, the resulting reduction in competition will ensure that 
the spectrum will be auctioned at a price lower than its true market 
value. As a result, the viability of these valuable and necessary 
programs will be at risk.
    Existing carriers have proven track records of designing and 
deploying highly sophisticated networks. Every year in its CMRS 
competition reports, the Commission has pointed to vigorous competition 
in the CMR market through the competing networks built by Verizon 
Wireless and our competitors. There is no basis for barring current 
providers from the auction; doing so would deprive companies of the 
additional spectrum they would want to acquire to expand their offering 
of high quality, spectrum-intensive advanced services.
    2. Wholesale Only Requirement. Frontline Wireless has proposed that 
a portion of the 700 MHz spectrum be licensed subject to several 
onerous conditions. The first of these is that the licensee cannot use 
the spectrum itself but must operate as a wholesale-only provider. This 
is, frankly, an absurd requirement. It makes sense only if you are 
trying to foreclose any existing carrier from acquiring the spectrum. 
Verizon Wireless provides both wholesale and retail services, as do 
many other carriers; and the FCC has consistently found that the 
industry is robustly competitive. There is simply no credible basis for 
the FCC to accept Frontline's proposal to strip the very carriers who 
have built a competitive industry from serving retail customers in the 
700 MHz band.
    3. Open Access Requirement. Frontline also proposes something it 
calls ``open access.'' This term has been the subject of much 
discussion but little or no definition or specificity. Frontline 
provides almost no meaning to this concept, other than vague 
requirements that the licensee permit any wireless device to connect to 
the network, and that the licensee operate solely as a wholesale 
service provider. Frontline claims that these requirements are 
important components of its proposal to build public safety a broadband 
network. However, many public safety agencies have raised doubts about 
how Frontline's open access requirements would impact them. Moreover, 
saddling the spectrum with these obligations would reduce interest in 
the spectrum at auction, positioning Frontline to acquire the spectrum 
at a price substantially below market value.
    Frontline's request for ``open access'' should be viewed as 
defining requirements for physical access to existing networks. These 
requirements disregard the way wireless networks are designed and 
operated to meet the needs of subscribers. On Verizon Wireless' and 
others' networks, the cell phone or PDA is in fact part of the network. 
It is constantly communicating with the network, and we are responsible 
for its operation under our FCC licenses. This is why we put all 
wireless devices through rigorous quality testing. Further, and just as 
importantly, customers see their service as inclusive of the device 
they use and have come to expect the carrier to ensure its performance.
    Imposing physical access conditions would risk harm to the network 
and undermine the quality of service provided to our customers. 
Moreover, experimenting with such an uncontrolled regime for a system 
that is specifically designed to be used for public safety 
communications, as Frontline proposes, would be particularly dangerous. 
Frontline's plan contains no safeguards to ensure that customers' 
untested devices and novel uses of spectrum would not reduce the 
quality of service provided to public safety or commercial users, or 
cause harmful interference to other users operating within the licensed 
spectrum or others operating in adjacent spectrum. For example:

   E-911 Service could be compromised. A mandate that carriers 
        allow customers to attach any device to the network would make 
        it more difficult for carriers to comply with their E-911 
        obligations. The handsets that customers would attach to the 
        network would not necessarily be E-911 capable; and even if 
        they were, the network might not be able to communicate with 
        the handset to determine the caller's location.

   Handset prices will likely increase. Handsets designed to 
        operate with multiple, or all available, wireless networks will 
        require additional hardware and software to ensure basic 
        operability. Some applications may need to be loaded in 
        multiple formats. Think of a computer that has to be both Apple 
        and Windows capable and must support game-playing on 
        Playstation, Xbox, Game Boy, and Nintendo platforms, etc. 
        Interoperability has a price, with very few practical benefits. 
        You generally use only one network at a time.

   Harms to wireless users would occur. Because wireless 
        devices share a network's spectrum resources, every device has 
        an impact on the spectrum available to other users. An 
        unapproved device can impact the network and its capacity to 
        serve the maximum number of customers. It can also cause 
        interference to other users, blocking their access to the 
        network. Wireless operators today ensure that every device is 
        subject to rigorous testing and meets certain quality standards 
        to guard against these risks. An open access regime would 
        deprive operators of that ability and thereby protect their 
        customers.

    4. Net Neutrality. Perhaps encouraged by Frontline's proposal, 
several groups want to seize on the 700 MHz auction as a way to impose 
broader ``net neutrality'' rules on wireless carriers. They are 
demanding that the FCC somehow dictate net neutrality, even though each 
of these groups would appear to define it in different way. I have the 
same concerns about a broader net neutrality mandate as I do for open 
access. Generally, proponents of the concept focus on issues involving 
traffic routing and management along proprietary networks. If what the 
proponents are talking about are the rights of users to access the 
public Internet and applications of their choice, wireless customers 
can already do just that. If, however, they want to preclude wireless 
carriers from offering their own value-added products and services, or 
to require wireless carriers to permit customers to download any 
application they want onto their handsets, I have the same fundamental 
disagreement. On a wireless network, applications have the potential to 
cause serious harm. For example:

   The user experience could be compromised. In the wireless 
        context, air interface signal-to-noise conditions vary by user 
        with time. More packets can be delivered to the user when the 
        signal-to-noise ratio is good than when it's bad. The wireless 
        industry uses sophisticated queuing and scheduling algorithms 
        at each base station to optimize throughput by sending packets 
        to users during times of good signal-to-noise conditions. Would 
        these practices be precluded? These practices improve the user 
        experience for all subscribers.

   Users could find network access more difficult. In the 
        wireless broadband context, users on-line within a certain 
        geographic area share the available spectrum resource; 
        therefore, the bandwidth requirements of one user can affect 
        those of all users in the same geographic area. A few users 
        operating ``bandwidth hog'' applications can actually prevent 
        other users from obtaining access to the network. If the 
        wireless operator cannot manage the bandwidth hog applications 
        in some principled way, it cannot achieve a fair allocation of 
        the available resources for as many subscribers as possible.

   Just as Internet content and applications vary in size, they 
        also vary in their sensitivity to latency, or delay. E-mail 
        delivery and web searches are generally not overly sensitive to 
        latency. On the other hand, certain applications are very 
        sensitive to latency, and require ``fast lane'' delivery of 
        packets. An operator must have the flexibility to provide 
        priority transmissions if the quality of service requires.

   Security risks would increase. Hostile content and 
        applications are common on the Internet in the form of viruses 
        and denial of services attacks, among others. Network operators 
        address and deal with such risks by filtering them out, thereby 
        ensuring improved user experiences for all subscribers on-line.

   Beneficial content filters could be jeopardized. Broadband 
        networks can establish filters that protect children from adult 
        content, or some computers from any specified content. There is 
        no reason why consumers should not be able to subscribe to 
        filters of their own choosing, whether by subject matter or 
        size or point of origin, if the technology is available. Again, 
        the network operator would have to manage against certain 
        packets to benefit consumers.

    Having spent many years building and operating wireless networks, I 
strongly believe that open access and net neutrality requirements would 
do a huge disservice to wireless industry and our customers. Wireless 
companies have delivered enormous benefits to the economy and consumers 
by being free to innovate and differentiate their products. It is bad 
enough that there is no problem that could justify such regulation. 
Worse, imposing open access and net neutrality would cause real harms 
to one of the Nation's most successful industries, to innovation, and 
to our customers.
Conclusion
    Verizon Wireless urges that the 700 MHz auction be held as soon as 
possible, without rules that foreclose bidders or impose unfounded and 
ill-advised requirements. The 700 MHz auction, if conducted fairly, and 
without the sorts of risky and counterproductive conditions discussed 
above, holds the promise of raising billions for the U.S. Treasury 
while delivering the benefits of the most advanced wireless technology 
to the American public. There will be plenty of winners, in the form of 
innovation, job creation, economic growth, and increasing U.S. global 
competitiveness. But if we get it wrong, and use this auction as a 
platform for forcing unjustified and risky spectrum policy onto the 
wireless industry, the only losers will be the American public.

    The Chairman. I thank you very much, Mr. Lynch.
    May I now recognize Mr. Small.

STATEMENT OF MICHAEL SMALL, CHIEF EXECUTIVE OFFICER, CENTENNIAL 
                   COMMUNICATIONS CORPORATION

    Mr. Small. Chairman Inouye, Vice Chairman Stevens, members 
of the Committee, thank you for allowing me this opportunity to 
appear today.
    For the last 9 years, I have served as the CEO of 
Centennial Communications, a regional provider of wireless and 
integrated communications services with over 1 million 
customers across parts of six states in the Midwest and South, 
as well as Puerto Rico and the U.S. Virgin Islands. Previously, 
I worked for larger and smaller providers of wireline, 
wireless, and cable TV services.
    At Centennial, we have been in business for almost 20 
years, and succeed in the competitive wireless industry by 
focusing on the needs of customers in small cities and rural 
markets. We get off the highways and provide coverage in 
communities often underserved by national carriers. In many 
markets, like Paw Paw, Michigan, or Eunice, Louisiana, we are 
the only carrier with a retail presence. Centennial's well-
trained associates are ``the'' source for wireless advice on 
service and assistance in these markets.
    Yet, our business is coming to a crossroads. Consumers are 
now demanding 3G broadband services. To deploy these services, 
carriers like Centennial need more spectrum.
    The 700 MHz spectrum is the critical element to furthering 
broadband deployment of services to rural America. With its 
outstanding propagation characteristics, 700 MHz spectrum will 
help bring wireless broadband to areas where terrain, 
technology, and economics make the provision of wireline 
broadband service difficult or impossible.
    The buildout cost differential between existing PCS or AWS 
spectrum and 700 MHz should be at least three to one, making 
buildout in rural America uneconomical without 700 MHz 
spectrum.
    I would like to address three issues regarding the 700 MHz 
auction, including the appropriate mix of band plans, the 
potentially harmful nature of the proposed geographic buildout 
mandate, and why additional regulatory encumbrances are 
counterproductive and unnecessary.
    First, with regard to the band plans, Centennial agrees 
with the Commission, that providing a mix of CMA, EA, and REAG 
licenses will maximize competition and geographic reach. We 
support the Commission's proposal for the lower 700 MHz band. 
In the upper 700 MHz band, Centennial opposes the Frontline 
plan and strongly urges adoption of a band plan that includes 
at least one CMA license.
    Licenses awarded on the basis of large geographic areas 
unreasonably favor large national carriers and handicap 
regional carriers like Centennial. Using the recently completed 
AWS auction as an example, CMA licenses align well with our 
existing U.S. footprint of 8.6 million POPs. But, to cover our 
territory with larger EA licenses would have forced us to 
purchase four times as many POPs, including expansion to cities 
like Detroit and Chicago. The resulting cost increase of more 
than $200 million is an insurmountable hurdle for a company 
like Centennial, with under $1 billion in revenue.
    Currently, carriers like Centennial provide the best, and 
sometimes only, service in many small and rural markets. 
National carrier coverage is often limited to major highways in 
rural areas, like I-10 in the Southeast, where Centennial and 
our roaming partners each have excellent coverage. But, off the 
interstate, in places like Kinder, Louisiana, and Prentiss, 
Mississippi, Centennial provides the best coverage. The best 
way to make sure that future 3G and 4G services make it to 
rural America is to allow regional carriers to compete for 
spectrum, that spectrum needed to bolster our service 
offerings.
    Ensuring rural markets have comparable service to urban 
markets is not only in Centennial's customers' best interests, 
but serves the public interest by providing robust networks for 
local public safety and for customers of national providers who 
roam in our area.
    Second, Centennial shares the Commission's desire for 
widespread provision of mobile wireless services, but we oppose 
the Commission's proposal to impose a geographic buildout 
mandate based on arbitrary deadlines. Centennial is not alone 
in this view, and we agree with many commentators who have 
demonstrated that arbitrary geographic buildout rules are 
contrary to this objective, and will undoubtedly chill interest 
in the auction, particularly for licenses that include large 
rural areas.
    And, finally, Centennial opposes unnecessary, untested, and 
often self-serving proposals to encumber all or part of the 700 
MHz band with regulatory obligations such as wholesale-only 
business obligations or open access or net neutrality 
requirements.
    The Commission's nearly 15-year evolution toward a 
flexible-use policy has been a tremendous success. These 
poison-pill proposals, including Frontline's, should be 
recognized for what they are and rejected as solutions in 
search of a problem if the tremendous success of the AWS 
auction is to be replicated and the huge success and innovation 
of the wireless industry is to be perpetuated.
    Thank you for the opportunity to appear before the 
Committee today. I look forward to answering your questions.
    [The prepared statement of Mr. Small follows:]

     Prepared Statement of Michael Small, Chief Executive Officer, 
                 Centennial Communications Corporation
    Chairman Inouye, Vice Chairman Stevens, and members of the 
Committee, thank you for the opportunity to testify at today's hearing. 
I am Michael Small, and I serve as the CEO of Centennial Communications 
Corporation, headquartered in Wall, New Jersey. I also serve on the 
Executive Committee of CTIA--The Wireless Association.
    Centennial is a provider of regional wireless and integrated 
communications services in the United States and the Caribbean. In the 
United States, we operate GSM-based wireless networks in parts of six 
states in the Midwest and South. Our midwestern service area covers 
parts of Michigan, Ohio, and Indiana, including mid-sized cities such 
as Grand Rapids, Lansing, South Bend, and Ft. Wayne. Our southern 
service area covers parts of Texas, Louisiana, and Mississippi, 
including mid-sized cities such as Beaumont, Lafayette, Alexandria, and 
Natchez. Centennial's Caribbean business owns and operates CDMA-based 
wireless networks that provide both mobility and residential broadband 
services in Puerto Rico and the U.S. Virgin Islands. In total, 
Centennial serves approximately 1.1 million wireless subscribers. We 
also operate a fiber-based CLEC in Puerto Rico, bringing state-of-the-
art, high-bandwidth solutions to many Fortune 500 companies with 
operations there.
    Since our creation in the 1980s, Centennial has focused on serving 
small cities and rural America. Today, we are successful in a highly 
competitive marketplace because we are intensely focused on serving the 
local needs of the people who live, work, and play in our small city 
and rural markets. To succeed, we must serve these regional areas much 
better than our national competitors.
    At the outset, I would like to thank the Committee for its work on 
the DTV Act, the legislation that made the 700 megahertz auction 
possible by facilitating the DTV transition. It is critically important 
that the Federal Communications Commission meet the auction schedule 
set forth by Congress in the DTV Act, and that it promptly issue simple 
and straight-forward service and technical rules that will ensure that 
the wireless industry has the spectrum it needs to continue to innovate 
and serve the needs of more than 230 million existing wireless 
subscribers, as well as the tens of millions of new subscribers that 
the industry is projected to add over the next several years.
    At Centennial, we view the 700 megahertz auction as an opportunity 
to augment our spectrum holdings in a way that will enhance our ability 
to bring robust, high-quality broadband service to our customers. The 
700 megahertz spectrum is ``rural-front'' spectrum with propagation 
characteristics that make it orders of magnitude more efficient than 
the recently auctioned AWS spectrum for serving very rural areas. The 
700 megahertz spectrum will help us to make wireless broadband access 
available in areas where terrain, technology, and economics render the 
provision of wireline broadband access difficult or impossible.
    I would like to address three issues, including:

   the appropriate mix of band plans for the 60 megahertz 
        intended for auction to commercial service providers;

   the harmful nature of the proposed geographic buildout 
        mandate; and

   why additional regulatory encumbrances are counterproductive 
        and unnecessary.
The Commission's Service Rules Should Provide for a Mix of Licensing 
        Opportunities
    Centennial agrees with the Commission's conclusion that ``by 
providing a mix of CMA, EA, and REAG licenses in the 700 MHz Commercial 
Services spectrum, we provide a more balanced set of initial licensing 
opportunities that provide an effective means of access to spectrum 
especially in rural areas, while effectively meeting other Commission 
goals.'' Centennial, whose licensed service areas are regional and 
often rural in nature, applauds the Commission's commitment to 
providing continuing opportunity for regional carriers to expand their 
product offerings to customers living, working and traveling outside of 
the large metropolitan areas of the country.
    The existing band plan for the lower 700 megahertz band divides the 
spectrum into five blocks: three 12 megahertz paired blocks (consisting 
of two 6 megahertz segments each) and two unpaired 6 megahertz blocks. 
One of these 12 megahertz blocks and one of the 6 megahertz unpaired 
blocks have already been auctioned. In a prior notice, the Commission 
announced a preference to retain this band plan because of its mix of 
geographic market sizes and spectrum allocations.
    The upper 700 megahertz commercial services band plan now consists 
of 30 megahertz of spectrum currently divided into two blocks: a 10-
megahertz paired block consisting of two 5-megahertz segments (C Block) 
and a 20-megahertz paired block consisting of two 10-megahertz segments 
(D Block). In the 700 MHz Commercial Services Notice, the Commission 
sought comment on the band plan and whether it should reconfigure the 
size of these spectrum blocks. As a result, five proposals for the 
upper 700 megahertz band are now before the Commission.
    To ensure the optimal mix of licenses, Centennial strongly urges 
adoption of a band plan for the upper 700 megahertz band that includes 
at least one CMA license. Licenses awarded on the basis of large 
geographic areas favor the large, national wireless carriers and 
handicap regional and rural carriers, like Centennial, whose service 
areas tend to be defined by CMA boundaries. This is not an issue of 
favoring small companies in the spectrum policy; rather, it is an 
acknowledgement that an auction with only large licenses effectively 
forecloses participation by small carriers, while an auction with CMA-
sized licenses permits carriers of all sizes an opportunity to compete.
    From the beginning of telephone service, the large 
telecommunications companies have focused on metropolitan areas with 
smaller companies providing service to the small and rural markets of 
the country. Data provided to the Commission by the national carriers 
shows that they place their emphasis on high-density markets. Ten years 
after the original PCS licenses were granted, national carriers had 
covered less than 70 percent of their MTA POPs in states like Alaska, 
Arkansas, Kansas, Mississippi, and New Mexico. Even when constructing 
in less-populated areas, the national carriers tend to build along 
major thoroughfares without venturing far into the less populated 
hamlets. For example, Centennial and its roaming partners all have 
excellent coverage along major thoroughfares like I-10 in Louisiana, 
but off the interstate, it is companies like Centennial that are 
providing coverage in places like Kinder, Louisiana and Prentiss, 
Mississippi. Through roaming arrangements with Centennial and other 
carriers like us, customers of nationwide carriers are able to enjoy 
all of their regular wireless features when business or pleasure takes 
them to these remote areas.
    In addition, Centennial frequently is the only carrier to have a 
retail presence in these markets. In places like Paw Paw, Michigan; 
Peru, Indiana; and Eunice, Louisiana, we operate company-owned retail 
outlets for wireless service that are not merely points of sale, but 
also full-service operations designed to meet all of the needs of our 
customers, including bill payment, customer support, and post-sale 
technical assistance.
    To roll-out high-speed broadband wireless services, regional 
carriers like Centennial need additional spectrum to enable the 
delivery of these new and exciting capabilities. If the only additional 
spectrum available is limited to blocks of large geographic service 
areas, it will be uneconomical for Centennial to acquire the spectrum 
we need because we would be forced to vastly expand our footprint 
rather than focusing on improving services in our existing territory. 
For example, using the license areas defined in Auction 66, acquiring 
spectrum covering our existing domestic footprint of 8.6 million POPs 
would require the purchase of 41 CMAs with 9.7 million POPs. To cover 
the same footprint on an EA basis would require 18 EAs with over 34.3 
million POPs. This is an insurmountable hurdle for a company the size 
of Centennial.
    By bidding for CMA-based licenses, we can continue the important 
work of providing modern, state-of-the-art service in the less-
populated and remote areas of the country. In doing so, we can ensure 
the continued and expanded availability of modern wireless 
communications in the markets we serve, benefiting not only those who 
live there, but everyone who travels to those areas as well. Ensuring 
this level of service in small markets creates economic and educational 
opportunities for those who live there, consistent with the Nation's 
long-standing commitment to Universal Service.
    The most logical way for the Commission to ensure that the service 
rules provide for CMA licenses in the upper band is to reject the 
proposal submitted by Frontline. As I will discuss later in my 
testimony, the conditions sought by Frontline are inappropriate and 
would needlessly constrain the number of parties likely to compete at 
auction for the spectrum in the upper band. Frontline's proposal is not 
necessary to meet the needs of public safety, and it inappropriately 
and unlawfully converts public safety spectrum, licensed to a qualified 
public safety organization, into a resource that Frontline plans to use 
to provide for profit commercial service. By dismissing Frontline's 
proposal, the Commission can adopt a plan that supports CMA licenses 
with paired spectrum in the upper 700 megahertz band.
The Commission Should Not Impose a Geographic Build-Out Requirement on 
        700 MHz Licensees
    Centennial shares the Commission's desire for widespread provision 
of mobile wireless services, and as our long history demonstrates, we 
are firmly committed to serving rural markets. Nonetheless, we have 
serious concerns about the Commission's proposal to impose a geographic 
buildout mandate based on arbitrary deadlines.
    From where I work in New Jersey, I cannot effectively and do not 
dictate on-the-ground investment decisions in Pineville, Louisiana, or 
Angola, Indiana. I need my associates in the field to determine the 
best and most economical way to meet the needs of our customers. A 
build-out requirement that limits our ability to focus on places where 
demand and need are greatest could in fact have the opposite of its 
intended effect--consumers might see lower quality and less service. 
Being forced to build to meet arbitrary deadlines might force companies 
like Centennial to make decisions to purchase equipment based on what 
is available now, rather than on the basis of what might be available 
in the near future. As a result, many consumers will have to wait to 
enjoy full 3G and ultimately 4G technology. Further, if we fail to meet 
these arbitrary deadlines, we could be forced to return spectrum that 
we have every intention of using in the future. This outcome would hurt 
Centennial, and it cannot help consumers.
    Less than 3 years ago, the Commission considered the issue of 
performance requirements in the Rural Wireless Order and affirmed the 
current trend in favor of substantial service. The Commission rejected 
calls to revert back to geographic- or population-based buildout 
requirements and instead concluded that mandated buildout was 
economically counterproductive and inconsistent with a reliance on 
market forces. Commissioner Copps echoed this point in his separate 
statement accompanying the Further Notice, saying that ``[W]e also need 
to make sure that we do not unfairly punish licensees--especially in 
rural areas--who cannot engage in aggressive build-out for perfectly 
good economic reasons.''
    The notion that every hertz of licensed spectrum must be put into 
use throughout each licensed area does not make sound economic sense. A 
policy of government-imposed, forced investment would result in 
uneconomic and unsustainable deployment. The stringency of the proposed 
build-out requirement is even more objectionable when coupled with the 
proposed cap on CETC support proposed recently by the Federal-State 
Joint Board on Universal Service.
    There are numerous examples of Universal Service being used to 
extend networks to areas that would be bypassed without access to 
universal service support. In some cases, wireless carriers have used 
high cost universal service support to deliver service to areas that 
previously had no access to telecommunications--wireless or wireline.
    Universal Service support has been important to Centennial in 
places like Louisiana. Centennial used support from the Universal 
Service program to bring service to two Concordia Parish communities--
Shaw and Blackhawk--that did not have any telephone service at all 
until we made it available a little more than 2 years ago.
    Centennial also used support from the Universal Service Fund to 
deploy facilities that performed reliably during and after Hurricane 
Katrina. The resiliency of the Centennial network allowed us to provide 
critical recovery services to other wireless providers whose networks 
failed, the U.S. Coast Guard, FEMA, and the Red Cross, and to help 
those in shelters to call and text message loved ones to let them know 
they were safe.
    The proposed cap on CETC access to universal service support 
threatens the progress that has been made in bringing high-quality, 
reliable wireless service to rural America, and it would do harm to the 
rural communities Centennial serves or aspires to serve. Neither the 
proposed cap nor the proposed geographic build-out requirement serve 
the interests of rural consumers, and neither should be adopted.
The Commission Should Not Impose Additional Regulatory Encumbrances on 
        700 MHz Bidders
    The Commission's nearly 15-year evolution toward a flexible use 
policy has been a tremendous success, and there is no evidence to 
suggest that a return to the command-and-control spectrum regulation of 
the 1980s is warranted. Accordingly, Centennial opposes unnecessary, 
untested, and often self-serving proposals to encumber all or parts of 
the 700 megahertz band with regulatory obligations such as wholesale-
only business obligations or ``open access'' or ``net neutrality'' 
requirements. These ``poison pill'' proposals should be recognized for 
what they are and rejected.
    The proposals by Frontline, the Ad Hoc Public Interest Spectrum 
Coalition, and the Media Access Project to impose an ``open access'' 
regime would require 700 megahertz licensees to enable any customer to 
attach ``any compatible device'' subject to minimal do-no-harm rules 
and to permit such devices to reach any website, post any information, 
provide any service and access or provide any application, without 
regard to the need for a carrier to manage its network efficiently and 
for the benefit of its entire customer base. The Ad Hoc proposal also 
advocates for a wholesale-only business plan with an exception for the 
provision of retail service through a structurally separate affiliate, 
subject to further limits if the licensee currently holds spectrum in 
the market.
    These proposals are deeply misguided. As CTIA observed in response 
to the Skype petition seeking wireless Carterfone and ``open access'' 
policies, ``exposing wireless networks to untested mobile handsets and 
applications would degrade network performance, create harmful 
interference, prevent carrier compliance with important social policy 
obligations, and open networks to greater security threats.'' Carrier 
management and certification of phones must be permitted because these 
steps ensure that network elements work in tandem with handsets to 
provide the highest quality voice and data services. Moreover, in order 
to maximize spectral efficiency, carriers must be able to manage the 
use of applications that require large amounts of bandwidth or near-
constant connection to the network, such as streaming media and peer-
to-peer services.
    There is no economic basis to impose open access or other intrusive 
forms of regulatory intervention on the wireless industry. Indeed, in 
light of the competitiveness of the U.S. mobile wireless service and 
equipment markets, which will only become more competitive as a result 
of the 700 megahertz auction, the Ad Hoc proposal represents the very 
definition of a solution in search of a problem. It, along with the 
Frontline and Media Access Project proposals, should be rejected and 
the government should refrain from imposing any single business plan--
including those that are novel and untested--or any other departure 
from the Commission's successful flexible use policies on the 700 
megahertz spectrum. Instead, the auction should proceed with few, if 
any, encumbrances, and the market should determine which business plans 
and competitors will prevail. The Commission must avoid calls to 
substitute its judgment for that of the marketplace if the success of 
the AWS auction is to be replicated.
          * * * * *
    Mr. Chairman, I thank you again for the opportunity to appear 
before the Committee, and I thank you and your colleagues for your 
attention to the 700 megahertz auction process. With proper execution, 
the 700 megahertz auction holds great promise for Centennial, for other 
wireless carriers, and, most importantly, for America's consumers.
    I look forward to answering any questions you may have.

    The Chairman. Thank you very much.
    Dr. Sarva?

             STATEMENT OF AMOL R. SARVA, CEO, Txtbl

    Dr. Sarva. Thank you, Chairman Inouye, Vice Chairman 
Stevens, and distinguished mmbers of the Committee, for the 
opportunity to address a critically important topic for the 
future of the wireless industry.
    As a leader of a group of wireless entrepreneurs and myself 
among the founders of one of the prominent companies in this 
industry, I'm here to bring a different perspective. My 
colleagues and I have taken new ideas to market. We've built 
things from scratch. We've created thousands of jobs and 
billions of dollars in value. We've even done this in 
collaboration with the ``big guys.'' Virgin Mobile was one of 
my first ventures. It has over a billion dollars in revenues 
today, and this year it's gone--it's filed to go public.
    I'm currently working on my third wireless startup, Txtbl. 
I'd love to tell you all about it, but today I'll focus on what 
you can do to make more stories like mine possible in America.
    Fifteen of us wrote a letter, last week, to FCC Chairman 
Martin in support of an open access ``E Block.'' We believe the 
wireless industry is full of opportunities for innovation. 
There are billion-dollar ideas all over the place. But today, 
the large wireless carriers have the keys to the castle. 
Getting your innovation into the national market is difficult 
and a lot more time-consuming than it should be. These 
negotiations add months or years. They make it harder to raise 
initial capital. They force you to bet big, early, instead of 
betting small, the trial-and-error approach essential to the 
entrepreneurial process.
    An open-access framework in part of the 700 MHz band, by 
contrast, would enable innovation at Internet speed. My own 
experience at Virgin Mobile is a good example. My colleague 
John Tantum was the Founding President, and I was the second 
person he hired.
    Virgin is a success story, but it was risky in the early 
days. We spent nearly 2 years traveling around to all the 
carriers to see if anyone would deal with us. In general, the 
answer was no. And at numerous points, I thought we were 
finished. By far, the scarcest commodity in this process was 
network access. It was far easier to raise capital. Once the 
network deal was done, we had offers for hundreds of millions 
of additional investment.
    In the end, only Sprint, one of the lagging large players, 
was willing to deal with us. And all this with the high profile 
backers and major capital that Virgin had provided. The young 
Steve Jobs, despite all of his visionary ideas, would never 
have had a chance.
    Even still, we had to make compromises to get a deal done 
with Sprint. We agreed to market a prepaid product that would 
not directly compete with Sprint's contract plans. 
Unsurprisingly, the door to new ideas is only open when you 
serve the network partner's self-interests directly.
    So for much of what the typical marketing departments 
required of us the engineering departments of carriers get 
their say, too. Only approved devices or applications are 
permitted, lest one is unsafe for the network. It's a 
reasonable constraint. But the U.S. operators are notorious for 
running the longest and most difficult certification processes 
in the world, around 9 months for a new device. These days, it 
can take only 3 months to design a new device from scratch, but 
9 months to certify it. Top-class carriers in other countries 
around the world need much less time, sometimes just a few 
weeks. Big device makers have told me this privately; they 
wouldn't say it here.
    On the other hand, the carriers seem to get their devices 
done faster than their partner's devices, ours. With one 
carrier, we changed the ring tones on the phone that had 
already been approved, and were told this would require a 45-
day recertification process.
    And the marketing department gets a vote here, too. You 
need their authorization to even submit a device. I think 
carriers sometimes confuse ``safe for the network'' and ``safe 
for the bottom line.'' The old Ma Bell monopoly used the same 
line to keep competition and innovation out for years. When the 
FCC finally called their bluff, consumers got inventions, like 
the fax machine, the cordless phone, the modem, and billions of 
dollars in economic growth.
    In closing, as entrepreneurs we are pragmatic. We are not 
here asking for changes regarding existing spectrum. It's out 
there. We want to open a portion--10 MHz--of the upcoming 
auction, less than 3 percent of the licensed mobile spectrum. 
Here's why. It'll be a sandbox for entrepreneurs. I can tell 
you this, my colleagues and I will be out there creating new 
services in spectrum like this. ``Open access'' means three 
things. We think it has a clear meaning. Number one, open 
devices. And, number two, open services. It means the freedom 
to connect any compatible device with published safety rules 
that let users access any complying device or service. And, 
number three, an open auction, requiring the license holder to 
auction off a portion of network capacity through an open and 
transparent auction mechanism. That's the market at work.
    Finally, we applaud Congress and the Commission for paving 
the way with the DTV transition. Now is the chance to capture 
the upside by setting aside a portion of the public's airwaves 
for use by the public--innovators, startups, entrepreneurs. 
Broadband, the mobile, Internet, next-generation wireless, 
we've been talking a lot about it, and they're all coming soon. 
Let's set up America to lead the way.
    Thank you very much.
    [The prepared statement of Dr. Sarva follows:]

            Prepared Statement of Amol R. Sarva, CEO, Txtbl
I. Background
    Thank you Chairman Inouye, Vice Chairman Stevens, and distinguished 
Members of the Committee for the opportunity to address the Committee 
on a topic that I see as critically important to the future of the 
wireless industry in America. I am here today as a leader of the 
Wireless Founders Coalition for Innovation, which is a group of 
seasoned wireless industry entrepreneurs who have founded wireless 
companies that now generate billions of dollars of revenue and have 
created thousands of jobs. We have brought innovation to the wireless 
industry by creating new business models, launching new services, and 
addressing pressing consumer needs that were previously overlooked by 
the large wireless carriers.
    I am what is sometimes referred to as a serial entrepreneur. 
Currently I am Co-Founder and CEO of Txtbl, a startup wireless company 
based in New York which is just leaving the ``garage stage'' and 
closing its first round of venture financing. I would like to say more 
about Txtbl, but the U.S. Senate is no place for free advertising and 
besides we are still in ``stealth mode.'' Let's just say for now that 
we have ambitious plans to change the way millions of Americans 
communicate. This is my third wireless startup. In 2000, I was among 
the first four team members of Virgin Mobile USA, my first wireless 
venture. The first and most successful mobile virtual network operator 
(MVNO) in the United States, Virgin Mobile pioneered pre-paid calling 
plans and has made wireless service accessible to millions of 
customers--especially younger people, lower income and low-credit 
people and ethnic minorities--who were previously underserved by the 
major operators. In just the 5 years since our launch, Virgin Mobile 
has gone from zero to nearly 5 million customers and achieved over $1 
billion in revenues. It recently filed for its initial public offering. 
In addition to my entrepreneurial experience, I was also a management 
consultant with McKinsey & Company, where I provided strategic advice 
to large telecommunications companies. I attended New York City public 
schools including Stuyvesant High School, received my B.A. in Economics 
and Philosophy from Columbia University and my Ph.D. from Stanford 
University in Cognitive Science.
    Other members of our Coalition are also responsible for a number of 
``firsts'' in the U.S. wireless market. For example:

   Fabrice Grinda founded Zingy, one of the first mobile 
        content companies, which built the market for ringtones and 
        mobile entertainment in the United States. Zingy grew from $0 
        to over $50 million in revenue in 4 years.

   John Tantum, mentioned above, co-founded Virgin Mobile USA 
        as its first President and has been my partner in subsequent 
        ventures.

   Jason Devitt was the founder of Vindigo, which publishes 
        more than twenty different applications for mobile phones 
        including its famous city guide.

   Pat McVeigh was CEO of Omnisky, one of the first service 
        providers to market a national wireless data product. He was 
        CEO of PalmSource, the company that created the revolutionary 
        Palm operating system.

   Sam Leinhardt founded Penthera, which has created one of the 
        world's first software platforms for mobile television 
        broadcasting, as well as founding three prior technology 
        companies and having served as CEO of a mobile e-mail software 
        maker acquired by Nokia.

   Alex Asseily founded Aliph, which created revolutionary, 
        military-grade audio technology for wireless phones and the 
        Jawbone wireless headset.

   Martin Frid-Nielsen founded Soonr, a novel service that very 
        flexibly gives consumers access to their PC data from any 
        mobile device or network, and holds four patents in wireless 
        data synchronization.

    These are just a few examples: the full group of 15 founders is 
listed in Appendix A. Most of us are now working on our second, third, 
or fourth wireless startups, many of which are still in the ``garage 
stage.'' We continue to seek new applications for wireless technology 
and to push the envelope to help Americans be more productive, save 
money, feel more secure, and--not to be ignored--have more fun by using 
wireless services.
    Additionally, I want to emphasize that several other very 
successful and ambitious entrepreneurs have shared their support for 
this approach with us in private as colleagues, but are stifled from 
articulating these views publicly for fear of reprisals by the large 
carriers who control access to national wireless networks today. I can 
sympathize with their position. I've been there too.
II. Executive Summary
    Last week the Wireless Founders Coalition for Innovation wrote a 
letter to FCC Chairman Martin in support of an Open Access E Block, as 
described in Frontline's proposal. We believe the wireless industry is 
ripe with opportunities for innovation and economic growth, but the 
large wireless carriers currently act as gatekeepers to block or deter 
many of these opportunities. From firsthand experience we know that 
negotiating with the large carriers for access to their networks can be 
a difficult and time-consuming process that can add months if not years 
to the launch of a new venture and hinder the ``trial-and-error'' 
process intrinsic to the entrepreneurial process. An Open Access 
framework, by contrast, would enable innovation at ``Internet speed.''
    My personal experience working with the large carriers as an MVNO 
is instructive on these points. Virgin Mobile USA was successful in 
spite of a huge number of hurdles raised by the wireless incumbents. We 
almost failed to get a network deal with any carrier. We almost failed 
to navigate the arduous device certification process. Who knows how 
many other ventures have failed to pass through the ``star chamber'' of 
the wireless incumbents' technical and business requirements processes?
    As entrepreneurs we are not only visionaries, we are pragmatists. 
We know it is difficult too for the FCC to force the large carriers to 
open up their existing networks retroactively. Nor do we ask the FCC to 
apply Open Access rules to the entire 700 MHz band. However, we think 
it is eminently reasonable for the FCC to designate a single 10 MHz 
block in the upcoming auction--a small fraction of the 700 MHz spectrum 
allocated to commercial use--as a sandbox for entrepreneurs or an 
incubation tank where young, fragile ideas have a chance to live. We 
applaud the Commission for paving the way for the DTV transition and 
freeing this valuable spectrum for new and exciting services. We 
believe, however, that this effort will have been wasted if it does not 
create opportunities for entrepreneurs to freely explore new ideas, 
services, and business models.
    The 700 MHz auction could prove to be a pivotal event in the 
history of the wireless industry, marking the transition to the age of 
the ``wireless Internet''. But this will only happen if the FCC makes 
the right decisions, if it seizes the entrepreneurial opportunity and 
gives the American people a chance to participate in the upside from a 
new and improved approach to wireless policy.
III. Protecting Network Harm vs. Prohibiting Network Uses
    For decades prior to the FCC's seminal Carterfone decision, 
consumers were prohibited from attaching any device to the telephone 
network unless it was expressly sanctioned (and sold) by Ma' Bell. 
Basically, the phone company kept competition at bay by arguing that it 
couldn't keep phone service running without ``absolute control'' over 
the network. Finally, in I968, the FCC called their bluff, and said 
that so long as a manufacturer shows that its device won't harm the 
network, there's no reason to keep it out of the hands of the public. 
As a result, we got the fax machine, the answering machine, the modem, 
and billions upon billions of dollars of new economic productivity.
    Yet today, wireless carriers control subscribers' wireless devices 
much as AT&T once controlled the wireline experience. One can get a 
sense of the operators' proprietary control over the networks by 
looking at the restrictions they place on their retail customers. By 
way of example, here is an excerpt from the Terms of Service that 
currently apply to Verizon Wireless's data services (emphasis included 
in the original):
        Data Plans and Features

        Data Plans and Features (such as NationalAccess, 
        BroadbandAccess, GlobalAccess, Push to Talk, and certain 
        VZEmail services) may ONLY be used with wireless devices for 
        the following purposes: (i) Internet browsing; (ii) e-mail; and 
        (iii) intranet access (including access to corporate intranets, 
        email, and individual productivity applications like customer 
        relationship management, sales force, and field service 
        automation). The Data Plans and Features MAY NOT be used for 
        any other purpose. Examples of prohibited uses include, without 
        limitation, the following: (i) continuous uploading, 
        downloading or streaming of audio or video programming or 
        games; (ii) server devices or host computer applications, 
        including, but not limited to, web camera posts or broadcasts, 
        automatic data feeds, automated machine-to-machine connections 
        or peer-to-peer (P2P) file sharing; or (iii) as a substitute or 
        backup for private lines or dedicated data connections. This 
        means, by way of example only, that checking e-mail, surfing 
        the Internet, downloading legally acquired songs, and/or 
        visiting corporate intranets is permitted, but downloading 
        movies using P2P file sharing services and/or redirecting 
        television signals for viewing on laptops is prohibited. A 
        person engaged in prohibited uses, continuously for 1 hour, 
        could typically use 100 to 200 MBs, or, if engaged in 
        prohibited uses for 10 hours a day, 7 days a week, could use 
        more than 5 GBs in a month.

    As you can see, Verizon spills quite a bit of ink telling users 
what they are not allowed to do using their wireless data connections. 
You may use your wireless connection for simple e-mail or web browsing, 
or corporate applications but not for ``any other purpose.'' Not for 
instant messaging. Not for Voice over IP. Not for Internet video. Not 
for downloading games. Not for any other lawful consumer Internet 
application invented in the past 15 years, really. Customers are on 
notice that using the network in lawful but non-approved ways puts them 
at risk of having their service terminated.
    Like the old AT&T monopoly, wireless carriers argue that unless 
they dictate exactly how and with what device a consumer uses the 
wireless network, it will all come tumbling down. Indeed, in response 
to the Coalition's call for an open access network on the E Block, one 
of the incumbent carriers responded that just four Slingboxes can take 
down a cell site. But is a Slingbox, or any other device designed to 
allow consumers to remotely watch video, inherently ``unsafe''? And are 
other prohibited services--like VoIP or free text-messaging services--
inherently harmful to the network? Of course not.
    Instead, like any use of the network, some applications may make 
more use of the network than others, and regardless of the use, some 
consumers will use the network more intensively than others. This is 
not a new problem. Carriers deal with the issue of voice capacity by 
charging for minutes of use on the network. Customers who use lots of 
minutes pay more than those who do not, and the price mechanism gives 
customers an incentive to ration their usage. Equally important, the 
pricing mechanism gives carriers an incentive to increase capacity so 
that they can generate more minutes and hence more revenue. What if 
carriers simply charged data users for the amount of capacity they use, 
just as they charge voice users for minutes of use? In that case, 
streaming video users would pay more for using more network capacity 
and, if the price was too high, they might reduce their use of 
streaming video applications.
    Carriers also argue that they need absolute control over the 
consumer experience, lest the consumer should stumble upon a device or 
use that provides a lesser quality or otherwise different experience 
than that offered by the carrier. But if a consumer wishes to use a 
free instant messaging service, instead of the carrier's own paid 
messaging service, how is that a ``harm'' to the network? It simply 
means that the consumer is free to make their own decision as to a 
tradeoff between price, quality and a host of other variables. Maybe 
the consumer is an ``early adopter'' who is willing to try out a new 
product on the leading edge of technology. Early adopters are 
notoriously willing to accept tradeoffs in product quality in order to 
have the ``newest thing''. Fortunately for the rest of us, it is these 
early users who allow innovative products to ``cross the chasm'' from 
laboratory to the mass market.
    Simply put, there is no reason, apart from commercial self-
interest, why a carrier needs to ban streaming video devices, webcams, 
Voice over IP, or any other such application. These prohibitions are 
akin to telling subscribers what conversations they can or cannot have 
on their mobile phones (e.g., quick chats about what to pick up for 
dinner are OK, long conversations with old friends are not). The only 
devices and uses that shouldn't be allowed are those that would 
actually harm the network. For example, a device that would operate 
above acceptable power limits would cause interference to other users, 
and certainly it is reasonable for a carrier to ban it. But 
particularly as we move to an all-IP wireless world, there is no 
inherent reason that one byte of traffic should be allowed while 
another byte is deemed ``harmful''. Similarly, if a device meets a 
published technical specification of acceptable ``behavior'' (or, for 
that matter, if it is type approved by the FCC), there is no reason to 
require special permission from the carrier before it can connect to 
the network.
IV. Obstacles to Innovation in Wireless
    Wireless entrepreneurship is not for the faint of heart. The 
wireless industry is dominated by four large nationwide carriers: 
Verizon, AT&T, Sprint, and T-Mobile, a.k.a., ``The Big 4.'' Members of 
our Coalition have dealt extensively with the Big 4, as partners, 
suppliers, customers, and competitors. We have developed business 
relationships at all levels of management and some of these 
relationships have even grown into friendships. The Big 4 counts among 
its ranks many bright and talented people, including more than a few 
visionaries and technical wizards. Dealing with these people is often a 
pleasure; dealing with their organizations is more difficult. The Big 4 
are large, generally risk-averse companies which exercise very tight 
control over their networks.
    An entrepreneur looking to create a new device or service that 
somehow touches one of these networks typically has to get some measure 
of approval from the carrier. For a new device this might involve 
waiting 6 months or longer while it undergoes ``device certification,'' 
even when the device is merely a cosmetically-altered variant of some 
previously tested device. For a new software application this might 
involve lengthy negotiations over ``deck placement'' of the software, 
which may compete with an inferior product offered directly by the 
carrier itself. For an MVNO, the approval often requires convincing the 
carrier's wholesale arm that a new retail service targets an under-
served market niche and will not compete for customers with the 
carrier's retail arm. And as discussed above, the carriers' Terms of 
Service also prohibit many cutting edge applications that involve 
passing data traffic ``over the top'' of carrier networks. Each of 
these barriers significantly raises the cost and risk of bringing a 
mobile product or service to market.
    My own experience starting Virgin Mobile USA is instructive. Virgin 
Mobile is a success story, but one whose fate was by no means assured. 
While any new venture must confront the slings and arrows of outrageous 
fortune, we faced the additional risk of having to find a Big 4 carrier 
that would support, if not endorse, our business plan. We started in 
late 1999 with the idea for a product that addressed youth and other 
segments of the market that the incumbents saw as ``unattractive'' 
because they were too poor, too low credit, and too hard to serve with 
existing models. We spent nearly 2 years traveling around to all the 
carriers to see if anyone would deal with us. In general, the answer 
was ``no'' and for a long time we were uncertain whether anyone would 
let us get off the ground. By far the scarcest commodity in this 
process was network access--it was far easier to raise capital (Virgin 
invested millions)--and once the network deal was complete we had 
offers for additional investment from outside investors for hundreds of 
millions more. In the end, only one of the weakest large players was 
willing to deal with us: Verizon and Cingular were dominant, T-Mobile 
had a powerful corporate parent, but Sprint was a lagging #3 player.
    We had to compromise away many degrees of freedom to get a deal 
done with the network partner, Sprint. We agreed to market a prepaid 
product that would not directly compete with Sprint's products nor 
compete for Sprint's mainstream customers. At the time we launched, 95 
percent of the market was postpaid. Sprint was 100 percent postpaid. 
Virgin markets only to youth, only offers prepaid, only runs on the 
Sprint network, and Sprint has significant representation on the board 
of directors. We were only able to create the Virgin service by 
operating within the direct self-interest of a weaker player that 
needed help, by avoiding any direct competition with what they do, and 
by giving them a measure of control in our company. In general, this 
frame of ``complementarity'' applies to almost every wholesale-style 
relationship that the major carriers have done. Moreover, the 
additional frame of ``credible partners'' with track record and capital 
also widely applies. Few pure upstarts gain the privilege of access to 
carrier networks. Of course, this limits the potential for innovation 
by new firms with new ideas. After Virgin Mobile paved the way, the 
large carriers have done additional MVNO deals, but who knows what 
great new idea is sitting in wireless purgatory, waiting for approval 
from the Big 4.
    A wholesale deal with Sprint was only the beginning of our 
treacherous journey for Virgin Mobile. We had to navigate many arcane 
business processes in order to get our phones into the market. One of 
the best examples is the device certification process mentioned above. 
Device certification is a big deal. It is always the subject of major, 
detailed negotiation in the MVNO relationships I have been a part of (I 
have negotiated Virgin's, several as a McKinsey consultant, and one for 
each of my subsequent ventures Blue and Txtbl). Almost all MVNOs end up 
taking ``table scraps'' from the big carrier, i.e., they use devices 
that have already been approved by the big carrier but which the 
carrier has cast aside. We followed this pattern at Virgin Mobile, 
simply releasing devices that Sprint had already certified months 
before and wasn't currently marketing. We did this because 
certification is so tedious. It is estimated to take 6-9 months for a 
new phone. These days, the state of phone technology is such that a new 
phone can be designed in less than 3 months. Yet the carriers take 
three times as much time to certify. Most non-U.S. networks take much 
less time--any device maker will tell you--which is why many cutting 
edge devices are introduced in Europe or Asia before the U.S. For one 
of my other companies, a different large carrier made us go through a 
45-day process to get approval for changing the wallpaper and ringtones 
. . . on a phone that had already been certified.
    The certification process is also inequitable. One's position in 
the certification queue is influenced by the carrier's marketing staff. 
MVNO devices get pushed down the queue for later approval. Exceptions 
are not usually made for wholesale partners but I have often heard of 
partially-certified, not-properly-working devices being released by the 
retail carrier for ``marketing impact''.
    Of course, it is possible to navigate through these obstacles. We 
have done it before. Our experience tells us, however, that the path 
can be arduous, especially when compared to our experiences in other 
sectors of the telecom industry, especially the Internet. Experience 
also tells us that these efforts often do not succeed or do so slowly 
or at substantial costs. For every Virgin Mobile there are several 
other ventures that were not able to navigate the carrier maze.
V. Requirements for Innovation in Wireless
    Wireless entrepreneurship would take a huge step forward if 
wireless was more like the Internet. What makes the wireline Internet 
so friendly from an entrepreneur's perspective is its Openness. One 
does not have to ask Comcast or Time Warner Cable or even Verizon's DSL 
division for permission to launch a new product, service, or device. To 
borrow the Nike slogan, you can ``just do it.'' In wireless, on the 
other hand, you can ``just ask the Big 4.'' If you are skillful--or 
lucky--enough to make it through to the other side, the upside can be 
large. Yet entrepreneurship is an iterative, trial-and-error process. 
Having to engage with the Big 4 at each cycle in the process can slow 
time to market and increase risks and costs for the entrepreneur. One 
should not have to negotiate with an access provider to offer a product 
elsewhere in the value chain. Based on my experiences and those of my 
fellow Coalition members, I would like to offer a few observations 
about what it takes to innovate in wireless.
    First, innovation requires small bets with real customer feedback 
and iterations. This is the ``try, try again'' rule. Entrepreneurs need 
``laboratory'' settings to commercialize ideas that may initially look 
small but turn out to be quite big. This means access to real, live 
customers using real, live networks. The bar was very high for us when 
we launched Virgin Mobile in the U.S.--we spent $40 million simply to 
put together the basic systems to run the service and meet Sprint's 
integration requirements. This was quite a high bar to trial our ideas. 
By contrast, most Internet services can be developed, trialed, refined, 
and redeployed multiple times in a fraction of the time and at a 
fraction of the cost. This is one reason the Internet is such a great 
breeding ground for innovation.
    Second, freedom to enter the market is essential. It is very 
difficult to know, a priori, where the good new ideas will come from or 
the magnitude of their impact on the market. For example, IBM gave up 
the rights to the Microsoft operating system. Yahoo! declined to 
acquire Google's search engine. And of course AT&T believed the cell 
phone would never become a ``mass market'' product. Innovation often 
happens from the edge of a market. Some of the most important 
inventions in telecommunications, including the Hayes Smartmodem, 
online services, the answering machine, and speakerphones were all 
commercialized by outsiders to the Bell System. Yet these new products 
and services were only made possible by the FCC's Carterfone decision 
and Part 68 rules, which removed the Bell companies from their 
traditional role as gatekeeper of the network.
    Third, the most disruptive innovations are typically the ones most 
easily dismissed by market incumbents. Some innovation is merely 
incremental and accretive to the existing business franchises of the 
incumbents. But the big changes are often disruptive (or appear so 
initially) and threaten them. When we started Virgin, the only carrier 
who was willing to deal with us was also the only big carrier with no 
prepaid mobile phone service and the distant number three player with 
little hope of catching the top spot. More fundamentally, it is easy to 
see why a market leader such as Verizon Wireless so fiercely opposes 
opening up its networks. They have a closed business model that makes a 
lot of money and they fear that a loss of network control will mean a 
loss of their position.
    The upshot is that America is not innovating in wireless at nearly 
the rate it could be. While all the ingredients for innovation--
wireless broadband networks, IP networking stacks, advanced multimedia 
devices--are readily available, the incumbent operators are too 
hesitant to try a new recipe for change. We think the industry needs a 
good test kitchen.
VI. The Open Access Solution
    Our Coalition believes that an Open Access requirement on the E 
Block provides a concrete and actionable way to carve out a portion of 
the wireless market for entrepreneurial activity. Specifically, we 
believe the FCC can unlock a wave of entrepreneurial energy if it 
implements three forms of Open Access in the E Block: Open Services, 
Open Devices, and Open Auction.
Open Services
    An Open Services rule would require that the E Block service 
provider allow customers to access ``over the top'' Internet-style 
applications of all kinds. These would include many kinds of services 
currently prohibited under the Big 4 subscriber contracts. Verizon 
Wireless, for example, prohibits the use of VoIP, webcams, and other 
media services. Under the Open Access rule, these kinds of Terms of 
Service would not be allowed. Entrepreneurs would be free to create a 
low-cost voice offering or, say, a mobile social network with 
videoblogging capabilities. The only limits on new service ideas would 
be the entrepreneur's imagination, not the wireless operator's Terms of 
Service.
Open Devices
    The Open Devices rule would ensure that users can connect any 
device of their choosing to their wireless network, provided it meets 
certain publicly specified technical standards. The consumer device 
industry has undergone a revolution in the past few years. Modular 
design and contract manufacturing now make it possible for even an 
upstart to sell sophisticated, purpose-built devices. In particular, RF 
technology is becoming increasingly commoditized, which means that it 
is now possible to embed wireless capabilities into devices using off-
the-shelf component parts. We envision a wave of opportunity in the 
device space, including the evolution of cell phones toward ``broadband 
communicators'', the addition of wireless community features to 
portable media and gaming devices, and even using wireless to provide 
cheap connectivity to otherwise ``dumb'' appliances. We are starting to 
see these kinds of devices emerge with local area WiFi capabilities, 
but the possibilities are even greater once the devices can access the 
sort of wide area 4G networks that will operate in the 700 MHz band. 
Bringing a new product to market is always a risky proposition, but it 
is made more risky by the need to pass a carrier's certification 
process, which as noted above is filled with uncertainty, is non-
transparent, and can take many months. Under the proposed Open Devices 
rule, entrepreneurs would be free to bring new devices to market, gauge 
customer reaction, and evolve the product all in the time that it 
otherwise would have spent languishing in a Big 4 lab somewhere. 
Especially when the underlying RF components have been shown to meet a 
``do no harm'' technical standard, there is no reason to subject the 
entrepreneur--or her customers--to needless bottlenecks.
Open Auction
    Finally, we applaud the recent suggestion made by Google and 
Frontline that a portion of the E Block network capacity be made 
available to all comers via an auction. This will ensure a range of new 
MVNO opportunities at fair and transparent market-clearing prices. 
Moreover, we can envision the connectivity being used in some non-
traditional ways. For instance, someone could offer an inexpensive 
wireless service subsidized by location-based advertising. Or, in 
another example, an entrepreneur starting an ``over-the-air'' online 
music store could include the cost of wireless connectivity in the 
price of the song download, so that the customer never has to subscribe 
to a wireless service to gain access to the music store. And of course 
there are many more ideas that we haven't even thought of yet (if the 
proposal is adopted).
VII. Pragmatic Considerations: the E Block as Starting Point
    Perhaps the best aspect of the E Block proposal, in our view, is 
that while it is forward thinking, it is also realistic. We believe it 
would be an eminently reasonable approach to apply Open Access only to 
the E Block. We observe that 10 MHz is a relatively small portion of 
the commercial 700 MHz spectrum and only about 2.7 percent of more than 
350 MHz that will have been allocated for CMRS use following this 
auction and last year's AWS auction.\1\ Over time, the provision of 
Open Access services by at least one carrier in the market could apply 
competitive pressure to the others to open up as well. A slight 
regulatory nudge could result in a major push by market forces.
---------------------------------------------------------------------------
    \1\ After the 700 MHz auction there will be approximately 358 MHz 
allocated for CMRS. This includes 50 MHz for cellular licenses, 120 MHz 
for Broadband PCS, 14 MHz for ESMR, 90 MHz for AWS, and 84 MHz at 700 
MHz. This does not include nearly 200 MHz of EBS/BRS spectrum and over 
50 MHz of MSS/ATC spectrum becoming available for CMRS-like services.
---------------------------------------------------------------------------
    Finally, we want to point out that the Open Access proposal also 
raises the possibility that entrepreneurs like us can bring new ideas 
and energy to the public safety market. Open Access would create new 
opportunities for specialized public safety devices and services, just 
as it would for commercial uses. Indeed, we note that the openness of 
the Internet has spawned many important and vital technologies such as 
firewalls, VPNs, routers, and other products geared toward network 
security. An Open Access regime, by unbundling network functionalities, 
allows for the development of ``best of breed'' security tools that 
bring state-of-the-art thinking to each layer of the network stack. 
Openness increases competition to meet public safety's unique 
requirements, by enabling customers to assemble an end-to-end framework 
using the best available component piece parts.
    As entrepreneurs, we subscribe to the old maxim, ``nothing 
ventured, nothing gained.'' In our opinion, an Open Access E Block is a 
venture worth pursuing, because the gains are potentially enormous.
     Appendix A: Wireless Founders Coalition for Innovation Members
Amol Sarva, Ph.D.
Co-Founder, Virgin Mobile USA
Co-Founder, Blue Mobile
Co-Founder and CEO, Txtbl

John Tantum
Co-Founder and former President, Virgin Mobile USA
Co-Founder and former Managing Director, Blue Mobile
Co-Founder and Chairman, Txtbl

Fabrice Grinda
Founder and former CEO, Zingy
Founder and CEO, OLX

Alex Asseily
Co-Founder and CEO, Aliph

Pat McVeigh
Former CEO, Omnisky
Former CEO, PalmSource
Early employee of Palm

DP Venkatesh
Founder and CEO, mPortal

Jason Devitt
Co-Founder and former CEO, Vindigo
Founder and CEO, Skydeck

Ram Fish
Founder and CEO, Fonav

Joel Jewitt
Co-Founder and VP of Business Development, Good Technology
Early employee of Palm

Martin Frid-Nielsen
Co-Founder and CEO, Soonr

Dr. Sam Leinhardt
Co-Founder and CEO, Penthera
Co-Founder of Leinhardt-McCormick Associates, FORMTEK, and STORM

Dennis Crowley
Co-Founder and former CEO, Dodgeball.com

Kent Thexton
Chairman and former CEO, Seven Networks

Peter Semmelhack
Founder and CTO, Antenna Software Founder and CEO, buglabs

Russell Cyr
Founder and CEO, BitWave Semiconductor
           Appendix B: Attributes of Closed vs. Open Networks

 
                                ``Closed''               ``Open''
 
Devices                   Carrier          New devices
                          certification required   do not have to be
                          before new device        approved by carrier
                          allowed to operate on    as long as they meet
                          the network              published technical
                                                   specification
Services                  Carrier limits   Users may
                          content and              access any content or
                          applications that may    service just as they
                          be accessed over the     can with the Internet
                          network                  Public APIs
                          Carrier hides    allow independent
                          protocols needed to      developers to create
                          access network           services using
                          features (e.g.,          network ``hooks''
                          geographical
                          positioning data)
Access                    Carriers very    Any service
                          selective about which    provider may purchase
                          companies may buy        network capacity via
                          wholesale network        an open auction that
                          access, look for         prevents favoritism
                          ``complementary''        and ensures price
                          (i.e., non-              transparency
                          threatening) business
                          models
 

    The Chairman. I thank you very much.
    If one of the goals of this auction is to encourage better 
participation, would the establishment of a smaller block size 
help? May I ask the panel?
    Mr. Small?
    Mr. Small. Clearly, smaller block sizes are determinative 
to our ability to participate in the auction. We can bid on 
virtually all CMAs, occasionally an EA, and the REAGs are 
totally out of the question. And we believe--we make our money 
by serving rural and small cities, and we think licenses should 
get in the hands of the people who want to do that, not be put 
in the hands of national players only, who then have to be 
induced, or forced, to kind of serve the rural areas.
    The Chairman. Mr. Lynch?
    Mr. Lynch. Senator, the band plan that I mentioned in my 
opening remarks--band plan 3--provides for licenses of all 
sizes, from the very smallest licenses that Mr. Small's talking 
about, to the regional areas, which I'm a significant proponent 
of.
    I think that you have to balance, in assigning license 
sizes, two different drivers here. Number one, to entice the 
smaller companies to participate in the auction, I think you 
need the smaller license sizes. That's a given. I would agree 
with Mr. Small on that. But when you look at our business plan, 
at Verizon Wireless, my goal is to deliver a 4G experience 
across the country. And historically, because of many of the 
smaller licenses that we have had to aggregate over time, it 
takes many years. In fact, we're going to close, in July, on a 
couple of licenses that have been out there for years and 
years, that we've been trying to fill in a piece of the upper 
west part of the country.
    So, to us, a REAG, or the larger license, provides us a 
more expeditious opportunity to deploy 4G services than would 
an attempt to aggregate in the secondary market, which is, in 
fact, what we would end up having to do, over years.
    So, I believe there's a need for both.
    The Chairman. Dr. Sarva?
    Dr. Sarva. I don't have a strong view about the large or 
the small size of the auction, about the blocks, but I do have 
a view about the value of openness in that context.
    If there's a band of the spectrum which is open for many 
different types of providers, innovators, and entrepreneurs, 
but also smaller carriers to use, it provides them an immediate 
access to a national coverage area using that open band.
    I believe the open-access band actually increases the value 
of every individual block whether it's large or small, because 
it makes the winner of a block able to offer a service that 
runs nationally. And that's a very important aspect of the 
open-access proposal.
    The Chairman. Because of the complexity before us, I'll be 
submitting my questions to you, and I hope you can respond to 
them.
    Senator Stevens?
    Senator Stevens. Well, I, also, will submit some specific 
questions.
    But let me ask one.
    There are some who argue that we should have a buildout 
based on population, others argue we should have a geographic-
based buildout. And I have the opinion that one size doesn't 
fit all. Is there any way we could develop a sliding scale to 
ensure that rural America is not left out, but, at the same 
time, that the demands of the major markets, such as New York, 
would be met?
    What do you think? Anyone have an opinion?
    Mr. Lynch?
    Mr. Lynch. Yes, Senator. I believe that that can best be 
achieved in the following way. And what I mean by that is that 
I believe a POP-based regime is the correct one to use on the 
overall basis. However, what's important, beyond that, is the 
amount of years that the carrier who wins that license has to 
build-out the footprint. And to entice build-out over a fairly 
rapid period of time without making it inordinately--let's say, 
financially impossible, maybe a better term--I think you need 
to think in terms of 5 years to a reasonable percentage of the 
POPs to be built. That would certainly, based upon how you 
achieve that percentage, would drive the carrier who won that 
spectrum to have to go into the rural areas. I mean, as an 
example, Senator, we, today, go into many areas that you would 
consider to be very rural. If we define ``rural'' as under 100 
POPs per square mile, much of the territory that Verizon 
Wireless already covers would be considered rural. But I will 
also be the first to admit to you that there are parts of the 
country where we're down to one and two people per square mile 
that we have not, at this point in time, managed to reach yet.
    The new spectrum, because of its propagation 
characteristics, I believe, will allow us to get there much 
more quickly.
    Senator Stevens. Thank you.
    Mr. Small, any comment?
    Mr. Small. I would add to that, that I believe geographic 
buildout requirements are wrong, in general, but they're 
extremely detrimental to rural areas, because it'll become 
uneconomic to cover 25 percent, even, of your State in total 
geography. And I believe a recent letter was sent by 55 rural 
companies to the FCC stating exactly that. So, it will have the 
perverse action of making it uneconomic to even accept a 
license--or bid for a license in a rural area.
    Senator Stevens. Thank you.
    Dr. Sarva? I take it you are supporting, Dr. Sarva, the 
position that was presented by the last panel, on Frontline. 
Now, let me ask you, in addition to that question, of geography 
versus population, don't you believe that if we agree with you, 
that that would reduce the overall bid for all spectrum?
    Dr. Sarva. The element that we're here to support, that I 
believe very strongly in, is the open access element. The 
comment I made just a moment ago, Senator, is that I think the 
open access proposal increases the value of any individual 
block of spectrum, because the winner in a State like Alaska or 
Hawaii is willing to bid more to own that particular block, 
because they know they have access to a national coverage area 
around the rest of the country. They can build a franchise in 
their locality, and offer their customers national reach 
whenever they travel. It's an important aspect that's not 
available today. It's a very expensive roaming regime of 
interconnection fees that are paid. Those are difficult. And I 
think Mr. Small can comment on that.
    So, I believe open access enhances the value of the 
spectrum, for that reason, number one. Number two, I think----
    Senator Stevens. Well, that's not quite the answer----
    Dr. Sarva.--innovation leads to----
    Senator Stevens.--to the question.
    Dr. Sarva. I'm sorry.
    Senator Stevens. Will it decrease the total receipt of the 
Federal Government for the spectrum?
    Dr. Sarva. Sir, my hunch is that you'd get more money as a 
result, because in localities, folks are willing to pay more 
for their particular piece of that spectrum instead of just 
having one or two bidders who can play at the national scale.
    Mr. Lynch. Senator, if I might, I respectfully disagree 
with Dr. Sarva, and I agree with you. The geographic 
requirement will, in fact, dictate a lower auction bid, because 
there would be a more immediate and more apparent obligation to 
make more investment into that property early on. So, the total 
net value that we would be willing to pay isn't going to 
change. But what will happen is that we would put less into the 
auction because we knew we were going to have to put more into 
the buildout.
    Senator Stevens. That was my opinion.
    Thank you very much.
    Dr. Sarva. Oh, I'm sorry. I'm sorry, Senator, I didn't 
actually mean to suggest that I disagreed with Mr. Lynch there. 
I think population's very important, and building the biggest 
national market as quickly as possible creates the most 
opportunities to take services to market.
    The Chairman. Thank you.
    Senator Thune?

                 STATEMENT OF HON. JOHN THUNE, 
                 U.S. SENATOR FROM SOUTH DAKOTA

    Senator Thune. Thank you, Mr. Chairman.
    For a state like South Dakota, having access to needed 
technology is a critical issue. And I guess the question I have 
is that--many of you have stated your opposition to buildout 
requirements. And the question is, if the FCC does not include 
buildout requirements in its rulemaking, what incentive is 
there to serve rural areas?
    Mr. Lynch. Senator, if I might, first of all, I don't think 
that Verizon Wireless is positing a position that we disagree 
with all buildouts. We are willing to step up to the obligatory 
buildout that goes with the license. The point that we were 
making before to Senator Stevens' question, of course, was, the 
amount we would bid on that license would be very different 
depending upon what the buildout requirements were.
    But I happen to believe that, particularly in your State, 
I'm familiar with the buildout that we've been doing in your 
State over time, and we've still got more to go--but that has 
as much to do with the spectrum that we've used to deploy that 
as anything else.
    But, as we continue to deploy--and I've spent about $6 
billion a year expanding the network--every year, we move 
further and further into the very rural part of the country. 
And I believe that 700 MHz--regardless of the buildout 
requirements, the business opportunities will drive us to 
utilize the better propagation characteristics of that spectrum 
to move further out into the rural markets than we can do with 
any of the spectrum we have today.
    Mr. Small. And, Senator, I feel strongly that allowing 
regional players to have spectrum in bite-sized chunks that we 
can deal with is what drives investment in rural America. For 
us to compete against the larger national players, we have to 
differentiate ourselves, and that's by taking better care of 
our local communities and in building more cell sites, opening 
stores with our associates in communities that wouldn't 
otherwise be there, and even seeking universal service funds to 
do that. For example, we just built, about 2 years ago, cell 
sites in Shaw and Black Hawk, Louisiana, which brought 
telephone service to those communities for the first time. 
There had been no landline, there had been nothing, despite all 
the perceived universal service requirements that have been in 
this country for, you know, dozens of years.
    So, I think, incentivizing regional providers is the best 
way to accomplish your objective.
    Senator Thune. If--and you all seem to be in favor of 
offering both small and large licensing blocks, but I guess my 
question is--and you, sort of, gave an answer to that, Mr. 
Small--but is that regulation, alone, enough to ensure that 
smaller telecom providers are going to be able to competitively 
be engaged in the process?
    Mr. Small. I think having the two CMA blocks gives us a 
good opportunity. And you need to balance the interests of all, 
but we would be pleased with that outcome. I know Centennial 
will be in the auction, and, I do believe, other regional 
providers as well. Will that answer the needs of every 
community everywhere? No. In many cases, large national 
carriers will buy the smaller licenses. They've done that in 
past auctions, and I would expect that would happen in the 
future. When you look at your real policy choices, the best way 
to get more coverage to rural areas is, first and foremost, to 
get the 700 MHz out there, because of its better propagation, 
and, second, to give a diversity of owners to that spectrum.
    Mr. Lynch mentioned 100 POPs per square mile. They go down 
as far as that, and that's our average. And we serve areas with 
two and three POPs per square mile.
    Senator Thune. Mr. Chairman, I may have a statement to 
include in the record, and I will yield back. I understand we 
have a vote underway. So, I yield back.
    Thank you.
    The Chairman. Thank you very much.
    Senator Kerry?

               STATEMENT OF HON. JOHN F. KERRY, 
                U.S. SENATOR FROM MASSACHUSETTS

    Senator Kerry. Thank you, Mr. Chairman. And I know we do 
have a vote on, and I'll try to go through this.
    First of all, thank you for doing this hearing. This is a 
critical hearing, and I appreciate your leadership on it, and 
getting the Committee involved, at this stage.
    I have a couple of questions, but I'd like to just make a 
few comments, if I can, Mr. Chairman.
    First of all, this upcoming auction of spectrum in the 700 
MHz band has profound implications beyond just the question of 
revenue. And I know revenue is something some people are 
concerned on. And we had a discussion here in this Committee, I 
guess about the level we could anticipate on the sale. I think 
we set it somewhere in the twelve and a half billion or 
something, with many people suggesting more may come. But I 
want to emphasize that the profound implications of this--for 
consumers, for schools, for businesses, small businesses, for 
emergency first responders, and for the rural communities we 
just heard about--can't be underestimated at all that this is a 
unique opportunity.
    The Chair and the Vice Chair have been here through a long 
developing stage of America's communications systems, and we've 
seen a lot of promises made, a lot of promises broken, and 
we've seen a huge transformation. When we sat here in 1996 and 
talked about what we were going to do in that bill, the entire 
discussion was telephony, and not many people thought about 
data. And, within a matter of months, it was obsolete, and we 
didn't see the promises fulfilled by the Baby Bells and others 
as to market entry. So, we have to, sort of, think about this 
with the history that we've traveled on in this Committee.
    And with this auction, we stand at a crossroads. We can 
either provide extraordinary benefits to millions of Americans, 
or we can tilt bandwidth policy to improve the already 
significant position of a few powerful deliverers of this 
service.
    I think there's a clear path that we have to take. The 
airwaves belong to the American people, and their use must 
always, even as we serve the marketplace that we are, it must 
also serve the public interest. So, the rules of this auction 
are critical. We've got to encourage competitive entry into the 
wireless market. We have to spur innovation. We have to 
increase affordability. And we have to increase the 
availability of broadband services.
    The fact is--and there's no argument about this--we're 
lagging in deployment. More than 60 percent of Americans do not 
subscribe to broadband services, primarily because they don't 
have access or they can't afford it.
    In my own State of Massachusetts, which is a recognized 
leader in innovation and technological advancement, we have a 
49 percent broadband penetration rate. And, guess what? We're 
the fourth best in the country.
    So, this auction of very valuable spectrum--some people 
have called this the beachfront property of communications--the 
key is, how do we serve this importance? How do we ensure that 
it works for the American people?
    And, I think, first the Commission must promote the 
broadest level of participation in the auction, as a guiding 
rule; encourage competition; and enable entrepreneurs to think 
innovatively and provide affordable highspeed wireless 
broadband services.
    Auction rules must be directed at promoting additional 
market entrants, not just serving those most powerful, capable 
of winning the auction bid based on their purchasing power 
today. Open access proposals and innovative bidding rules have 
got to be closely considered.
    And, second, I believe the FCC must settle on a strict 
buildout requirement that compels auction winners to offer 
services. I understand the fears of the industry about this. 
Some say that if you're forced to build a network, it can delay 
service and innovation. I'm absolutely confident that the 
Commission can find the appropriate balance. The spectrum has 
to be deployed in a reasonable time, but also in a reasonable 
manner. And what would be unacceptable is a set of rules that 
allow large companies to scoop up and warehouse this spectrum.
    I've been very, very encouraged, Mr. Chairman, by your 
attention on this matter. And I'm confident that you, also, 
want to seek strong requirements.
    I'm also encouraged that the Commission is taking a close 
look at solutions for public safety. And I see our friends, 
first responders, here in the room. We've been working on 
interoperability for quite some time, Mr. Chairman; and, 
despite our efforts, interoperability remains one of our most 
vexing policy challenges, despite the lessons of 9/11 and 
Hurricanes Katrina and Rita.
    So, providing an effective public safety communications 
network is of paramount importance, and I'm encouraged that the 
industry leaders are thinking about this, also, in an 
innovative way.
    Every American has an opportunity to benefit from this 
auction. And I, once again, emphasize, the long-term revenue 
stream that will come by adequately fostering the market growth 
that can come with this, and the market penetration that can 
come with this, far exceeds that, sort of, up-front quick hit 
that you look at in the auction itself, and we need to keep 
that in mind. When you look at the 60 percent of penetration, 
if we can get that, and get small businesses and parts of our 
rural States that suddenly become places where business can 
move and get into this fourth-generation world, we're going to 
be a much stronger economy, with a stronger tax base, with a 
stronger job base, and more competitive than the global 
community. And I think we need to look to that long-term 
strength.
    So, for schools, for our economy, for our families, for our 
first responders, this is a pretty critical process, and I 
appreciate the attention of the Committee to it.
    The big question--I have just one or two questions, if we 
have time, quickly--Mr. Lynch, is, if Verizon and other 
incumbent broadband service providers win most of the spectrum, 
is there any guarantee, then, that a third-pipe provider is 
going to be able to enter the market; a guarantee?
    Mr. Lynch. Senator, I'm not sure exactly how to answer your 
question with a very few words, but let me say this. With 900 
licenses at auction in the band plan that we've been 
recommending, which is band plan 3, I think that there is a 
tremendous opportunity for new entrants, as well as existing 
providers, who, like us, have a commitment to putting fourth-
generation out there.
    Again, I'm saying I'm not sure exactly how to answer the 
question that you've asked.
    Senator Kerry. Well, maybe rather than be rushed like this, 
because I know we've got a vote, and I don't want to tie us up, 
maybe I could pursue this, Mr. Chairman, in a couple of written 
questions, and just follow up in a way that would develop the 
record on it, which I'd like to do, and that would serve all of 
us, perhaps, more effectively.
    Mr. Lynch. Thank you. We'll do that.
    Senator Kerry. I really thank the Chair.
    [The prepared statement of Senator Kerry follows:]

               Prepared Statement of Hon. John F. Kerry, 
                    U.S. Senator from Massachusetts
    Mr. Chairman, the upcoming auction of spectrum in the 700 band has 
profound implications for consumers, schools, businesses, emergency 
first responders, and rural communities. We are presented with a unique 
opportunity to shape the future of wireless communication and 
innovation in America.
    With this auction, we stand at a crossroads--we can either provide 
extraordinary benefits to millions of Americans or tilt bandwidth 
policy to line the pockets of a privileged few.
    There is a clear path I believe must be taken: the airwaves belong 
to the American people, and their use should serve the public interest.
    We must establish rules in this auction that encourage competitive 
entry into the wireless market, spur innovation and increase 
affordability and availability of broadband services.
    There is no argument that we are lagging in deployment. More than 
60 percent of Americans do not subscribe to broadband service--
primarily because they don't have access or can't afford it.
    My own state of Massachusetts, a recognized leader in innovation 
and technological advancement, has a 49 percent broadband penetration 
rate. And it is 4th best in the country.
    So this auction of very valuable spectrum, takes on heightened 
importance. How do we ensure it works for the American people?
    First, the Commission must promote the broadest level of 
participation in the auction, to encourage competition--and enable 
entrepreneurs to think innovatively, and provide affordable, high-speed 
wireless broadband services. Auction rules should be directed at 
promoting additional market entrants. Open access proposals and 
innovative bidding rules must be closely considered.
    Secondly, the FCC must settle on strict build out requirements that 
compel auction winners to offer services. Now, I understand the fears 
of industry in this area. If we are forced to build networks, it delays 
service and innovation.
    I am confident the Commission can find the appropriate balance--The 
spectrum must be deployed in a reasonable time. What would be 
unacceptable is a set of rules that allow large companies to scoop up 
and warehouse this spectrum. I have been encouraged by the Chairman's 
attention to this matter, and I will be looking for a strong set of 
requirements.
    Finally, I am encouraged that the Commission is taking a close look 
at solutions for public safety. We have been working on the 
interoperability for quite some time. And despite our efforts, Mr. 
Chairman, interoperability remains one of our most vexing policy 
challenges--despite the lessons of 9/11 and Hurricane Katrina.
    Providing an effective public safety communications network is of 
paramount importance, and I am encouraged that industry leaders are 
thinking about the topic in an innovative way.
    All Americans have an opportunity to benefit from this auction. 
This is more than an issue of Government revenue--it is also about 
expanded access to revolutionary new technology for every American. Our 
economy, our schools, our families and our first responders are 
counting on the FCC to conduct a fair auction in the spirit of 
competition and innovation that drives our country.
    I, for one, will be watching closely.

    Mr. Lynch. Thank you.
    The Chairman. With that, we thank the panel, and we've got 
to go to vote.
    [Whereupon, at 12:15 p.m., the hearing was adjourned.]
                            A P P E N D I X

 Prepared Statement of Pam Montanari, Radio Systems Manager, Pinellas 
   County, Florida; Chairperson, Tampa Bay Urban Area Interoperable 
                             Communications
    Mr. Chairman and Members of the Committee, my name is Pam Montanari 
and I am Radio Systems Manager for Pinellas County, Florida. I also 
serve as the Chairperson for Interoperable Communications for the Tampa 
Bay Urban Area. Thank you for this opportunity to share with you the 
views of Pinellas County and the Tampa Bay urban area on the pending 
decision by the Federal Communications Commission (FCC) to establish 
rules and policy for the auction of 700 MHz spectrum. This is an issue 
of great importance to public safety organizations throughout the 
Nation and will determine our ability to provide life saving services 
to our citizens for many years to come.
    Pinellas County, Florida is among the largest counties in the 
United States and serves a permanent population of over 925,000 in west 
central Florida. We are dedicated to providing state-of-the-art radio 
communications for over 9,500 public safety personnel. The Pinellas 
County Emergency Communications Department is committed to providing 
high quality, efficient service to the citizens of Pinellas County.
    Pinellas County embraces new technology and has a history of 
leading field tests for advanced high speed data and video 
communications. Starting in 2001, Pinellas County conducted the first 
test of wideband technology, using an experimental license on wideband 
channels in the 700 MHz band and it performed well for the exchange of 
public safety data and video. Currently, Pinellas County is also 
conducting tests of various broadband technologies in the 4.9 GHz 
public safety broadband spectrum. Pinellas County is actively involved 
with neighboring public safety agencies in the Tampa Bay urban area to 
achieve interoperability in both voice and data communications 
solutions.
    Pinellas County and the Tampa Bay urban area support the concept of 
a nationwide broadband network designed to meet public safety 
communications requirements, however, it would be unfortunate if public 
safety is unnecessarily restricted to this one technology for future 
data services. We have filed comments at the FCC stating that public 
safety should be provided the flexibility to deploy either wideband or 
broadband data solutions in the 700 MHz band.
    If a nationwide broadband network-only proposal is adopted without 
allowing for wideband deployment in the 700 MHz band, there will not be 
sufficient public safety frequencies available in the Tampa Bay area 
for implementing both regional voice and high speed data solutions. Our 
public safety agencies must have the flexibility to implement these 
advanced high speed data communications technologies, whether broadband 
or wideband. We support using the 700 MHz data spectrum to provide the 
best combination of public and private high speed data systems that 
meet our coverage and operational requirements.
    Pinellas County strongly agrees with the many comments filed by all 
public safety representatives that overwhelmingly urged the Commission 
to ensure flexibility of solution choices in this band. As we noted 
above, Pinellas County is evaluating several technology solutions, both 
broadband and wideband, and we must continue to have the ability to 
choose the technologies that best fit our local requirements. To our 
knowledge, no public safety organizations filing comments at the FCC 
objected to having the flexibility to choose between broadband or 
wideband solutions.
    Pinellas County notes that while a nationwide broadband network 
built and operated by a commercial provider should be explored, there 
are a number of details that must be decided before public safety 
organizations can place the lives and property of our citizens in the 
hands of a commercial communications provider with no other allowed 
options. The FCC must guarantee certain minimum standards will be met 
by any commercial licensee who acquires through auction the adjacent 
commercial spectrum and commits to build out a nationwide broadband 
network targeted for both public safety and commercial use.
    The FCC must ensure that commercial communications providers and 
public safety leadership and agencies participate equally in defining 
the specifics of a proposed nationwide broadband network. For example, 
we propose that the specifications include the following minimum 
benchmarks:

        1. When fully built out, the nationwide network should cover at 
        least 95 percent of the jurisdictional area of the public 
        safety agencies on the broadband network. This means that a 
        city fire department must have city-wide coverage, a county 
        sheriff must have county-wide coverage, and a state police 
        department must have state-wide coverage. Each agency must have 
        at least 95 percent coverage at a minimum specified data rate 
        and level of reliability. Further, in order to provide mutual 
        aid and interoperability with neighboring agencies, these 
        coverage requirements should extend into the jurisdictional 
        areas of our neighboring agencies. Previously, the Commission 
        recognized the need for coverage into adjacent jurisdictions 
        when it established rules for the 800 MHz public safety band 
        regional planning. For a broadband network to be nationwide 
        when fully built out, coverage requirements tied to population 
        alone are not sufficient.

        2. Incident commanders and first responders must have immediate 
        access to communications resources in times of emergency 
        incidents and disasters. This includes adequate channel 
        capacity and operational control over the system, both the 
        commercial as well as the public safety channels. We cannot 
        wait for a national licensee or associated commercial 
        carrier(s) to be contacted for a decision. On-scene command and 
        control is responsible for orchestrating resources as needed to 
        control the emergency. These resources today include local 
        responders, assisting agencies, equipment and mission critical 
        voice communications. Going forward, agencies and incident 
        commanders will also need control of high speed data and video 
        communications resources at the incident as well.

        3. Reliability and security of the high speed data 
        communications must be assured by the commercial provider. 
        Public safety, especially law enforcement, must have the 
        capability to encrypt sensitive communications, including 
        imaging and video transfers and to control who has access to 
        this information. These requirements are of special concern for 
        a network which is proposed to accommodate both public safety 
        and commercial traffic. Today's dedicated public safety 
        networks are not open to the public to use, however, this may 
        not be the case under the Commission's proposed concept for a 
        nationwide broadband network in the 700 MHz spectrum. Also, 
        reliability requirements would dictate that the network must be 
        built to provide transmission redundancy, back-up power in case 
        of electric outages, and site, as well as network, security.

        4. The nationwide broadband network must have provisions for 
        high speed data applications that meet local and regional 
        public safety needs. For nationwide broadband interoperability, 
        public safety applications on the network must have some degree 
        of uniformity across all public safety agencies. At the same 
        time, applications must meet the different requirements of 
        functional agencies (law enforcement, fire, EMS), as well as 
        the differing requirements of agencies in varying demographics 
        across the country. This includes interfaces with existing 
        local networks and databases, some of which are not compatible 
        today.

    Regardless of the governance structure the Commission provides for 
the nationwide broadband public safety network, local and regional 
public safety entities must have input into the development of the 
requirements for such a network. The concept of a nationwide broadband 
network funded by commercial licensees in adjacent spectrum is 
appealing. However, given the many outstanding unknowns, there is 
currently no certainty that this proposed network would meet the 
operational and monthly cost requirements of Pinellas County and the 
Tampa Bay urban area agencies. In addition, the proposed build out 
schedule for the broadband network is 8-10 years, and it is likely that 
there could be geographic areas that still would not be covered by this 
network.
    Under the Commission's tentative conclusion, public safety agencies 
would have no option to deploy their own system if the promise of the 
nationwide network were not realized or if it were delayed in their 
area. Pinellas County and the Tampa Bay urban area believe that we must 
be able to implement a high speed data solution while we are waiting 
for the nationwide broadband carrier to roll out the network to cover 
our jurisdictional region. Further, we need the option to maintain that 
network at least until there is certainty that the nationwide broadband 
network as built in our area meets our specific operational 
requirements.
    Mr. Chairman, Pinellas County commends you for holding this 
hearing. It is important that the Congress, which first promised 700 
MHz spectrum to public safety a decade ago, maintain oversight over the 
implementation by the Commission. Available spectrum in these most 
desirable bands draws the attention of many who would like to gain 
access to public safety's resources. The promise of a nationwide 
broadband network constructed and paid for by a commercial licensee is 
appealing, but we must remember the adage that ``there is no such thing 
as a free lunch.''
    Pinellas County and the Tampa Bay urban area request the Committee 
to urge the Commission to provide local and state agencies the 
flexibility on at least a portion of the public safety data spectrum to 
implement the solution that best meets our high speed data requirements 
and budget. The options must include the ability to choose a local or 
regional network, whether broadband or wideband, especially while we 
await the nationwide roll out of a commercially-based broadband 
network. Public safety agencies can work through their regional 
planning committees to enable implementation of these choices on a 
local and regional basis.
    Again, Mr. Chairman and Members of the Committee, Pinellas County 
and the Tampa Bay urban area thanks you for the opportunity to testify 
today on our concerns about the 700 MHz auction and its potential 
impact on public safety.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                           Wanda S. McCarley
    Question 1. All parties appear to agree on the need to build a 
broadband network for public safety. However, the cost of building such 
a network and the length of time it would take to complete varies 
significantly, depending upon the approach that is taken. There are 
essentially 3 options. Option 1 is that public safety can try to build 
and operate this network itself at the local and regional level, as has 
traditionally been the case. Option 2 is similar to what was proposed 
in the FCC's ninth Notice of Proposed Rulemaking, where a national 
public safety licensee would partner with a commercial operator to 
build a shared public safety commercial network using the 12 megahertz 
of spectrum already allocated to public safety. Option 3 follows the 
Frontline proposal, where a national public safety licensee would 
partner with a commercial operator to build a shared network that not 
only uses 12 megahertz of existing public safety spectrum but also 10 
megahertz of commercial spectrum that will soon be put out for auction. 
Under each of these scenarios, what is your best estimate as to how 
much it will cost public safety to build and operate a next-generation, 
broadband network, and how long will it take to build out this network 
across the nation?
    Answer. The actual cost to public safety would depend on numerous 
factors--many of which are out of our current control. It's safe to 
say, however, that construction alone of a network such as this, that 
meets public safety's needs will cost many billions of dollars. Some 
estimates place the amount in the range of $22 billion. The cost is 
generally the same under each of Options, though the decentralized 
approach in Option 1 could be higher due to the lack of economies of 
scale. The primary difference is whether and how those costs are paid.
    Under Option 1, the costs would be localized for each separate 
broadband system, as is currently the case with state/local public 
safety systems. We believe the result of this approach for broadband is 
that wealthy areas, or those few areas with special access to Federal 
funds (e.g., National Capital Area), will ultimately build systems, but 
much of the Nation will be left unserved as the cost of a broadband 
network will be well-beyond the means of most local agencies. Under 
Option 2, there would be a single licensee, and theoretically a 
commercial partner. However, with only 12 MHz available, there would 
not be sufficient capacity to address both public safety requirements 
and sufficient commercial use to justify commercial investment and 
partnership. The national licensee would also lack tax and bonding 
authority, leaving it without any means to construct the national 
network. Option 3, or some variation of it, is what we favor, and what 
the FCC appears to have adopted in its order adopted on July 31. This 
approach provides sufficient spectrum for a joint system that meets 
public safety broadband requirements and a viable commercial network.
    We believe that Option 3, or a variation thereof, is the only way 
to build a broadband network ``across the nation''. We have advocated 
that the network be built to cover 99.3 percent of the Nation's 
population within 10 years, with significant interim benchmarks that we 
believe are addressed in the FCC's July 31 order.

    Question 2. One of the elements of proposals to create a public 
safety-private sector partnership is the creation of national public 
safety licensee to negotiate a network services agreement with a 
private operator. In your view, how should this national public safety 
licensee ensure that the needs of local first responders are met?
    Answer. We believe that the national licensee must be 
representative of local first responders. Thus, nine national public 
safety organizations have formed a nonprofit corporation that intends 
to apply for the FCC license. Each of the organizations shall select 
board members to the entity, and there will also be advisory committees 
of additional organizations and regional representatives.

    Question 2a. What benefits would result from the creation of a 
public safety licensee?
    Answer. A national public safety licensee could more effectively 
negotiate a national network sharing agreement with a commercial 
partner. It could also coordinate standards and interoperability 
procedures to ensure seamless interoperability across the Nation.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Bill Nelson to 
                           Wanda S. McCarley
    Question 1. Current 700 MHz proposals seem to contemplate 24 MHz of 
spectrum for public safety. Is that enough to meet future needs--
particularly in light of new broadband applications?
    Answer. It is not sufficient. Even when the 24 MHz was first 
allocated (per legislation passed in 1997), we knew it would not be 
sufficient to address all future data requirements. Half of the 24 MHz 
is dedicated for narrowband voice systems, for which there is 
substantial demand and existing deployments in some areas. The 
remaining half, standing alone, would not address all public safety 
requirements for broadband, especially in urban areas. It is also 
insufficient for a public-private partnership approach as there would 
not be ``excess'' capacity for commercial operation.

    Question 2. Does the additional 10 megahertz of public-private 
spectrum in the Frontline proposal help solve any shortage?
    Answer. Absolutely. It provides additional capacity when needed for 
major emergencies, and it provides the capacity needed for a viable 
public-private partnership. We note, however, that there are some 
aspects of what Frontline proposed that we do not support. Based on 
what we believe is in the FCC's July 31 order, the FCC appears to have 
found the right balance.

    Question 3. As you are all aware, one of the biggest problems 
facing public safety is interoperability. All too often, we see 
jurisdictional and technological barriers that inhibit public safety 
officials in one area from speaking to officials in an adjoining area. 
Of the solutions currently before the FCC, which solution does the most 
to foster interoperability?
    Answer. We support approaches that promote viable public-private 
partnerships to build a nationwide, interoperable broadband network. A 
national network can be built with a single standard and provide the 
widest possible coverage to ensure seamless service and 
interoperability for first responders. There will still need to be a 
need for many years to tie together existing public safety radio 
networks operating in various frequency bands.

    Question 4. If a public-private partnership--of some sort--is 
formed to manage a portion of the spectrum, how should disputes between 
public safety users and private entities be resolved?
    Answer. Clearly, public safety must be the primary factor in 
resolving disputes. We do not believe that the license for the relevant 
commercial spectrum should be granted unless and until a network 
sharing agreement is reached with the national public safety licensee. 
There should not be mandatory third-party mediation, as the disputes 
are likely to involve non-commercial, public policy issues regarding 
public safety communications. Thus, if there is to be dispute 
resolution, it should be managed by the FCC.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                           James L. Barksdale
    Question 1. All parties appear to agree on the need to build a 
broadband network for public safety. However, the cost of building such 
a network and the length of time it would take to complete varies 
significantly, depending upon the approach that is taken. There are 
essentially 3 options. Option 1 is that public safety can try to build 
and operate this network itself at the local and regional level, as has 
traditionally been the case. Option 2 is similar to what was proposed 
in the FCC's Ninth Notice of Proposed Rulemaking, where a national 
public safety licensee would partner with a commercial operator to 
build a shared public safety commercial network using the 12 megahertz 
of spectrum already allocated to public safety. Option 3 follows the 
Frontline proposal, where a national public safety licensee would 
partner with a commercial operator to build a shared network that not 
only uses 12 megahertz of existing public safety spectrum but also 10 
megahertz of commercial spectrum that will soon be put out for auction. 
Under each of these scenarios, what is your best estimate as to how 
much it will cost public safety to build and operate a next-generation, 
broadband network, and how long will it take to build out this network 
across the Nation?
    Answer. While the figures that follow are only our best estimates, 
the one thing that is certain is that Frontline's proposal for a 
public-private partnership will guarantee the construction of a 
nationwide, interoperable public safety network at no cost to public 
safety and the American taxpayers. Frontline approximates a cost of $10 
billion or less to construct a shared network with public safety, and 
all costs will be borne by the commercial licensee. Further, this 
option is the most economical, approximately doubling the spectrum 
available for public safety during peak capacity while dramatically 
reducing the need for cell splitting. This translates into a need for 
at least 40 percent fewer towers, which is pure savings of what 
economists call ``deadweight loss.''
    In contrast, under ``Option 1,'' public safety and the taxpayers 
will bear the cost of constructing a public safety network. This option 
is by far the most expensive, and will cost somewhere between $15-$20 
billion (or possibly more) to construct, because it will require far 
more towers than the shared network proposed by Frontline. Further, 
public safety will be forced to fund the construction itself, which it 
has stated time and time again will not be possible. Similarly, 
``Option 2'' will also cost at least $15 billion to construct. While 
``Option 2'' does alleviate some of the concerns about where public 
safety will receive funding to construct a network, the lack of a 
sufficient amount of spectrum for a shared network will certainly limit 
public safety's ability to secure a commercial partner and that 
partner's willingness to fund the build-out will be significantly 
reduced. Further, it will not provide public safety with additional 
spectrum in times of emergency.
    In terms of the time frames for construction of a nationwide, 
interoperable public safety network, a 10 year buildout requirement is 
very achievable under Frontline's Plan. Under ``Option 1'' and ``Option 
2,'' however, it is very difficult to estimate how long construction 
will take. Option 1 is likely to take decades because of the need to 
use taxpayer funding, likely generated at the state and local level. 
Moreover, under Option 1 with different networks being build at the 
state and local level, interoperability is likely to be a major 
problem. The construction will also take longer due to the additional 
cell towers required.
    Only Frontline's Plan will guarantee the construction of the much-
needed nationwide, interoperable public safety network within 10 years 
and without any cost to public safety and taxpayers.

    Question 2. Some opponents of the Frontline proposal have argued 
that placing conditions on the auction of certain commercial 
frequencies should be rejected because it would reduce potential 
auction revenues. How do you respond to this charge?
    Answer. The conditions proposed in the Frontline plan--open access 
and wholesale requirements on a nationwide license block--will 
encourage new entrants in the wireless market to bid in the auction, 
thereby increasing auction revenue. Open access will promote bidding by 
entities with diverse business plans, some of whom will have no 
intention to provide retail service or otherwise bundle access, 
software and services. Even entities that already operate wireless 
networks may choose to participate. Indeed, in recent days both Verizon 
and AT&T have indicated their intention to bid actively in the upcoming 
auction, so claims that such conditions are a ``poison pill'' to 
artificially set bid prices lower by keeping incumbent bidders away 
have proven to be false.
    A wholesale requirement would have a similarly positive effect on 
auction revenue. By unbundling network connectivity and retail service, 
a wholesale only requirement reduces the significant barriers to entry 
that have caused two wireless broadband incumbents to control more than 
half the market. If barriers to entry into wireless broadband service 
are not mitigated through measures such as open access and wholesale 
requirements on a small part of the spectrum up for auction, incumbents 
will have no competitors against whom to bid--resulting in a deflated 
price paid for that spectrum, and reduced funds to the Treasury.
    Frontline's plan also seeks to encourage auction participation by 
new entrants by allowing eligible entities to qualify for bidding 
credits. Previous FCC auctions demonstrate that where new entrants and 
small businesses participate, greater revenues result. To take just one 
example, in the Commission's PCS auction, bidding preferences for 
eligible businesses increased the government's revenues by more than 12 
percent--an increase in total revenues of nearly $45 million. Giving 
bidding credits to designated entities created extra competition in the 
auctions and induced established firms to bid higher. By contrast, past 
auctions also show that where incumbents have the opportunity to bid on 
spectrum without any limitations on its use, other potential bidders 
stay home, and incumbents--those entities with the most ability to 
pay--win their spectrum at a reduced price.
    Finally, regardless of the merits of the by-now-discredited 
position that auction rules reduce bidders' flexibility, which in turn 
reduces auction revenue, Section 309(j)(7) of the Communications Act 
clearly bars the Commission from basing a finding of public interest, 
convenience and necessity on the basis of such revenues. Congress 
should make sure the FCC follows that provision of the law.

    Question 2a. Would there be benefits that might outweigh any 
potential costs?
    Answer. As noted, the benefits of the Frontline Plan already 
outweigh potential ``costs'' to the Treasury, since new entrants' 
participation in the auction has been shown to increase auction 
revenues, and there is every reason to believe that this truism will 
hold in the 700 MHz auction. To the extent the Commission considers 
other benefits associated with the Frontline plan--as the 
Communications Act requires it to do--it should find that open access, 
wholesale and promoting small business opportunities are all consumer-
friendly policies directly in the public interest.
    Simply put, an open network benefits consumers more than a locked 
one. Recall the last time you went to a retailer to purchase a cellular 
phone. Most likely, your choice of phone was more or less dictated by 
your present service provider. Choosing a network circumscribed your 
choice of phone. Prior to the Commission's rule on cellphone number 
portability--an action Verizon and CTIA vigorously opposed, challenged 
in court, and excoriated in the press as unnecessary--the barriers to 
choice were even higher.
    The wireless broadband market, as presently constituted, results in 
even greater costs to consumers. In a highly concentrated market (see 
below), companies that control access to both the network and the 
consumer collect duopoly rents at the retail level while reducing 
choice. Unbundling network access from retail service, however, creates 
several new points of entry in wireless broadband delivery to the 
consumer. By creating opportunities for new entrants to specialize in 
different areas, benefits will inure to consumers due to more 
competition and lower prices in services, software and devices. Spurred 
by innovation, broadband networks (and the benefits associated with 
them) will roll out faster.
    Consumers don't participate in auctions. Therefore, the Commission, 
as auction designer, must represent the interests of those consumers in 
developing auction rules. Frontline's Plan benefits the public 
interest. These conditions are not just beneficial, moreover; they are 
needed--a point illustrated in more detail below.

    Question 2b. In your view why are such conditions needed?
    Answer. These conditions are absolutely essential to create 
competition and innovation in the wireless market. Incumbent providers 
currently operate in a consolidated marketplace that has essentially 
become a duopoly. The Commission's most recent CMRS Competition Report, 
for example, found that the wireless industry's HHI index, measuring 
market concentration, was 2700, up from 2450 in the previous year 
alone. To put this in context, the Department of Justice's Antitrust 
Division classifies any market with an HHI index above 1800 as ``highly 
concentrated.'' Furthermore, the number of national wireless carriers 
has dropped from six to four, with the top two--AT&T and Verizon 
Wireless--accounting for nearly two-thirds of all new subscribers.
    Spectrum is a scarce commodity, particularly 700 MHz spectrum, and 
because of market consolidation the incumbent retailers have a monopoly 
on this scare resource. Control over this low-frequency spectrum 
provides control over network services. Incumbents have every incentive 
to leverage this control over the network to corner the market on 
retails services. Consequently, these providers will rationally create 
vertically integrated businesses that raise prices to super-competitive 
levels and thwart innovation and new entry.
    The proposed open access and wholesale-only conditions will prevent 
incumbents from bottlenecking spectrum and continuing to hinder 
competition. If the FCC does not create a ``new build'' national 
network open to all content and devices, the likely outcome is that the 
United States will fall far behind other countries in wireless 
broadband development and deployment. On the other hand, should the FCC 
decide to create rules requiring a licensee to operate a wholesale open 
access network, the result will be a vibrant industry as dynamic as the 
Internet sector, and it will be headquartered on American soil.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Bill Nelson to 
                           James L. Barksdale
    Question 1. Current 700 MHz proposals seem to contemplate 24 MHz of 
spectrum for public safety. Is that enough to meet future needs--
particularly in light of new broadband applications?
    Answer. Public safety's communications needs reflect the nature of 
their job, which is sometimes steady but is frequently punctuated by 
huge spikes in demand. That makes it challenging to meet public 
safety's needs. On a daily basis, public safety will not utilize all of 
its spectrum, let alone additional spectrum. In emergencies, however, 
public safety might well need access to additional spectrum. This means 
that valuable spectrum will sit unused much of the time but public 
safety still may not have sufficient access in times of emergency.
    This problem spurred Frontline to propose the creation of a public-
private partnership for a shared network on the public safety broadband 
spectrum and the adjacent commercial block. The beauty of Frontline's 
proposed public-private partnership is that it efficiently utilizes 
scare spectrum resources and simultaneously helps to solve spectrum 
shortages that may occur during public safety emergencies.

    Question 2. Does the additional 10 megahertz of public-private 
spectrum in the Frontline proposal help solve any shortage?
    Answer. As mentioned above, public safety will not typically 
utilize the entire 12 MHz of broadband spectrum it has been allocated. 
During emergencies, however, public safety may need access to 
additional spectrum, particularly during national emergencies. Under 
the Frontline Plan, public safety will have instantaneous and automatic 
access to take over the adjacent commercial spectrum during 
emergencies, approximately doubling the amount of spectrum available to 
public safety when it needs it most and alleviating concerns about the 
insufficiency of the current public safety allocation.

    Question 3. As you are all aware, one of the biggest problems 
facing public safety is interoperability. All too often, we see 
jurisdictional and technological barriers that inhibit public safety 
oficials in one area from speaking to officials in an adjoining area. 
Of the solutions currently before the FCC, which solution does the most 
to foster interoperability?
    Answer. Frontline has proposed a solution specifically designed to 
address the problems associated with the current lack of 
interoperability in our public safety communication networks. Namely, 
Frontline has proposed a public-private partnership to facilitate the 
construction of a nationwide, interoperable, wireless broadband network 
for the public safety community. This network would be built at the 
expense of a national commercial licensee who would construct the 
network as a condition of the license.
    This plan presents the only realistic opportunity to facilitate 
much-needed interoperability by creating a solution for the funding of 
a such a nationwide network. By working with the National Public Safety 
Licensee (``NPSL''), the commercial licensee would be able to construct 
a network to public safety standards and ensure interoperability 
throughout the nationwide network.

    Question 4. If a public-private partnership--of some sort--is 
formed to manage a portion of the spectrum, how should disputes between 
public safety users and private entities be resolved?
    Answer. Frontline recognizes the importance of ensuring that the 
NPSL is able to decide whom it chooses as its network sharing partner 
and successfully negotiate an agreement with that entity. This is why 
Frontline proposed service rules which would give the NPSL the freedom 
to negotiate an agreement with any network partner, while having a 
guaranteed option via one-way arbitration that binds the D Block 
Licensee but not the NPSL.
    Under Frontline's proposed rules, the commercial licensee of the 
block adjacent to public safety would enter into good faith 
negotiations with the NPSL to form a network sharing agreement. Given 
the incentives of both parties, an agreement would likely be reached 
without Commission intervention.
    If there are any remaining disputes, as a last resort, Frontline 
has proposed that these be submitted to the FCC for one-way binding 
arbitration. The FCC's arbitral decision would only be binding on the 
commercial licensee and the NPSL would remain free to walk away and 
negotiate with another party. The bottom line is that the decision to 
proceed with a partnership would rest solely with the NPSL. If the NPSL 
does choose to walk away, provided the commercial licensee has acted in 
good faith and is willing to abide by the Commission's decision, the 
commercial entity would remain the licensee of the adjacent block.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                            Philip J. Weiser
    Question 1. All parties appear to agree on the need to build a 
broadband network for public safety. However, the cost of building such 
a network and the length of time it would take to complete varies 
significantly, depending upon the approach that is taken. There are 
essentially 3 options. Option 1 is that public safety can try to build 
and operate this network itself at the local and regional level, as has 
traditionally been the case. Option 2 is similar to what was proposed 
in the FCC's Ninth Notice of Proposed Rulemaking, where a national 
public safety licensee would partner with a commercial operator to 
build a shared public safety commercial network using the 12 megahertz 
of spectrum already allocated to public safety. Option 3 follows the 
Frontline proposal, where a national public safety licensee would 
partner with a commercial operator to build a shared network that not 
only uses 12 megahertz of existing public safety spectrum but also 10 
megahertz of commercial spectrum that will soon be put out for auction. 
Under each of these scenarios, what is your best estimate as to how 
much it will cost public safety to build and operate a next-generation, 
broadband network, and how long will it take to build out this network 
across the nation?
    Answer. The question is exactly the right question to ask and, 
unfortunately, I am not in a position to give a good answer to it. I 
can say that I am skeptical, as my testimony explains, that public 
safety can develop, own, and operate such a network itself. As between 
the last two options, it is fair to say that, in principle, the second 
option would require public safety to put up more of the money itself 
insofar as third option uses the encumbered spectrum as a form of 
subsidy to support the build-out of a next generation network.

    Question 2. Mr. Weiser, in your testimony, you describe some of the 
benefits of a next generation architecture for public safety and note 
that a partnership with a commercial provider could lead to a more 
efficient use of spectrum and to lower costs through greater economies 
of scale. Could you describe why a partnership might achieve these 
benefits and why the status quo does not?
    Answer. The status quo, whereby public safety agencies operate 
networks for themselves, involves the inefficient use of spectrum 
whereby each locality builds networks that they operate for themselves. 
Moreover, under the status quo, public safety agencies are left outside 
of the commercial ecosystem whereby large economies of scale accrue to 
the users of commercial networks. By partnering with a commercial 
entity and developing a network at a higher level, public safety can 
address both of these two failings--using a system that is architected 
efficiently, uses spectrum more economically as well as benefits from 
more options, more enhanced functionalities, and cheaper equipment than 
is currently available.

    Question 2a. Is it possible to quantify how substantial these 
benefits might be?
    Answer. Such a study is no doubt possible, but I am in no position 
to offer any substantiation of these benefits. By way of anecdote, 
however, consider that ``a cell phone with voice, video, and data 
capability costs about seven times less than a public safety digital 
portable radio that cannot even take a digital photo, much less send it 
to another person.'' Robert Rouleau, Connecting Data Networks, Public 
Safety Rep., Aug. 2006, at 98, 102. On the spectrum side of the 
equation, I cannot quantity just how much more efficiently a shared 
network would be (as opposed to individual local networks), but it 
would be very substantial and, given the value of spectrum as a 
resource, the savings to society from more efficient use of spectrum 
would be considerable.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Bill Nelson to 
                            Philip J. Weiser
    Question 1. Current 700 MHz proposals seem to contemplate 24 MHz of 
spectrum for public safety. Is that enough to meet future needs--
particularly in light of new broadband applications?
    Answer. As I note in my testimony, public safety agencies use 
spectrum in bursts, meaning that, for those times of emergencies, 24 
MHz is unlikely to be enough. For other times, however, it will be 
considerably more than enough--particularly if public safety networks 
are architected and operated efficiently. To address the nature of 
public safety's usage pattern, a shared commercial/public safety 
network capitalizes on a powerful insight--when public safety is not 
using its spectrum, it can be used by a commercial operator. By 
contrast, when public safety needs access to spectrum, this network 
would enable it to receive priority access to additional spectrum. 
Consequently, the major policy challenge is not finding public safety 
more spectrum that needs to be dedicated exclusively to public safety 
agencies, but rather developing a policy strategy that will facilitate 
the emergence of a new network that provides public safety agencies 
with access to the spectrum they need when and where they need it as 
well as with access to modern, Internet-based, broadband technologies.

    Question 2. Does the additional 10 megahertz of public-private 
spectrum in the Frontline proposal help solve any shortage?
    Answer. It does solve a shortage concern insofar as it virtually 
guarantees a commercial partner that would be willing to, when 
necessary, give public safety agencies access to additional spectrum 
when they need it.

    Question 3. As you are all aware, one of the biggest problems 
facing public safety is interoperability. All too often, we see 
jurisdictional and technological barriers that inhibit public safety 
officials in one area from speaking to officials in an adjoining area. 
Of the solutions currently before the FCC, which solution does the most 
to foster interoperability?
    Answer. The interoperability challenge has both a longer term and a 
nearer term component to it. On the long term front, the development of 
a next generation network--say, one spearheaded by a public safety 
spectrum licensee in partnership with a commercial provider--can 
provide a solution insofar as it promises to equip all public safety 
agencies with compatible equipment and network access. Over the nearer 
term (i.e., while such a network is developed and deployed), there are 
two options I am aware of for addressing interoperability issues. The 
first option is to equip all relevant agencies with compatible 
equipment--say, Project 25 radio systems. I am, however, very skeptical 
of that model because of its considerable costs and the limited 
functionality of such equipment. A second, and to my mind more 
appealing, option is to encourage all agencies to adopt Internet 
Protocol-based connections and interoperate using Internet-based 
applications. Such an option can be attained through the use of 
Internet gateways accessible through legacy radios or by adopting 
broadband, Internet technology directly (say, through a local WiFi 
network or EV--DO platform). This solution, to be sure, is imperfect, 
but, at least on a near term basis, it appears reasonably promising. 
For more details on this concept, see Philip J. Weiser, The Aspen 
Institute, Clearing the Air: Convergence and the Safety Enterprise 24-
25 (2006).

    Question 4. If a public-private partnership--of some sort--is 
formed to manage a portion of the spectrum, how should disputes between 
public safety users and private entities be resolved?
    Answer. This concern is a paramount question in the development of 
any such partnership. As I see it, the public safety licensee and its 
commercial partner would need to develop a framework that ensures that 
both parties cooperate effectively with one another. Such frameworks 
have numerous analogs in commercial relationships and I believe that 
such an agreement can be developed in this context as well. Presumably, 
the agreement itself will contemplate a dispute resolution mechanism 
(say, arbitration) and I would expect that mechanism to be the most 
effective and expeditious one. Nonetheless, if the obligations of a 
commercial partner with an obligation to serve public safety was at 
issue (as contemplated by the Frontline proposal), that obligation 
would ultimately need to be enforced by the FCC.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                            Paul J. Cosgrave
    Question 1. All parties appear to agree on the need to build a 
broadband network for public safety. However, the cost of building such 
a network and the length of time it would take to complete varies 
significantly, depending upon the approach that is taken. There are 
essentially 3 options. Option 1 is that public safety can try to build 
and operate this network itself at the local and regional level, as has 
traditionally been the case. Option 2 is similar to what was proposed 
in the FCC's Ninth Notice of Proposed Rulemaking, where a national 
public safety licensee would partner with a commercial operator to 
build a shared public safety commercial network using the 12 megahertz 
of spectrum already allocated to public safety. Option 3 follows the 
Frontline proposal, where a national public safety licensee would 
partner with a commercial operator to build a shared network that not 
only uses 12 megahertz of existing public safety spectrum but also 10 
megahertz of commercial spectrum that will soon be put out for auction. 
Under each of these scenarios, what is your best estimate as to how 
much it will cost public safety to build and operate a next-generation, 
broadband network, and how long will it take to build out this network 
across the Nation?
    Answer. It would be exceedingly difficult for the City of New York 
even to begin to estimate the costs and construction times associated 
with these options. Among other considerations, the answer depends on 
the unique network construction and operational requirements of each 
and every jurisdiction to be served by the broadband network. It would 
also depend on the nature of the network itself--the technology, 
spectrum, coverage, throughput, security, quality of service and backup 
power requirements, for example. Finally, in arriving at a cost 
estimate, it is important to focus not only on the costs of initially 
building the infrastructure, including real estate, but also the costs 
of maintenance, network applications and associated end-user devices.
    As for New York City, as I testified, we contracted in September 
2006 with Northrop Grumman for a $500 million high-speed data network 
for public safety that is scheduled for citywide deployment by March 
2008. The New York City Wireless Network (``NYCWiN'') will enable a 
wealth of mobile and fixed applications, including real-time video, 
rapid database lookup and the exchange of rich graphical information. 
The cost of NYCWiN covers infrastructure and the integration of certain 
applications and end-user devices over 5 years of operation.
    Indeed, the uncertainties associated with the cost of building, 
operating, and maintaining a national network are among the reasons why 
the City is concerned about utilizing a large segment of the 700 MHz 
spectrum allocated to public safety by Congress. If the proposed 
network does not succeed, then this valuable spectrum could be 
``lost.'' Consequently, notwithstanding the FCC's recent Report and 
Order, the City believes that the concept of a national network must be 
analyzed much more closely, and that a great deal of clarification is 
in order.

    Question 2. Mr. Cosgrave, you note in your testimony that New York 
City recently paid $500 million to develop a high-speed data network 
for public safety personnel. How many square miles does this network 
cover?
    Answer. The system will cover approximately the 320 square miles 
that encompass all 5 boroughs of the City of New York.

    Question 2a. Is the equipment for this network interoperable with 
other broadband networks such as the one here in Washington, D.C.?
    Answer. The equipment being used is fully interoperable with all 
Internet protocol systems, including Washington, D.C.'s network. The 
City of New York required the implementation of architectural elements 
that conform to existing standards. The radio system is based on the 
international standard known as UMTS, whose footprint currently covers 
80 percent of the world's wireless users. Moreover, the entire 
infrastructure is based on Internet protocol, which will allow 
interconnection of this system with those of other cities using 
standards-based protocols.

    Question 2b. If other jurisdictions were to contract for similar 
systems, what would the cost be of building broadband networks across 
the Nation?
    Answer. As I suggested in response to Question 1, above, the costs 
of even this particular technology would vary greatly from jurisdiction 
to jurisdiction depending on such variables as network construction and 
operational requirements. New York City is building-out an 
infrastructure with approximately 400 sites, with redundant backhaul 
and network operating centers. We are requiring demanding coverage, 
throughput, quality of service and backup power installations. We also 
must contend with a combination of tall buildings (or ``urban 
canyons''), on the one hand, and, at the same time, of covering a large 
geographical area. A jurisdiction with a different topography and 
different requirements would face different costs even using the same 
system.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Bill Nelson to 
                            Paul J. Cosgrave
    Question 1. Current 700 MHz proposals seem to contemplate 24 MHz of 
spectrum for public safety. Is that enough to meet future needs--
particularly in light of new broadband applications?
    Answer. No. To respond to the ever increasing number of anti-crime 
and homeland security-related needs, there has been substantially 
increased demand for wireless network applications, which, in turn, 
translates into a fast growing need for spectrum. New York City, and 
other high-risk jurisdictions, are continuing to experience great 
spectrum challenges to meet these required public safety services. As I 
discussed in my testimony, New York City has actually been required to 
go to the ``secondary spectrum market'' to purchase spectrum at 
commercial rates. It is unacceptable for our taxpayers to be required 
to bear the cost of purchasing publicly-owned spectrum in large measure 
to meet national security mandates. Therefore, we strongly urge 
Congress to encourage allocation of additional spectrum to local public 
safety entities.
    Moreover, I should note that, based on the currently available 
information about the FCC's recently voted, but yet to be released, 
Report and Order, it seems that those local public safety entities who 
choose not to participate in the nationwide broadband network would 
lose half of the 24 MHz of spectrum that was allocated to them by 
Congress. Finally, even for those public safety entities who do sign on 
to the network, a portion of their 24 MHz of spectrum will now be 
comprised by commercial usage on a secondary basis.

    Question 2. Does the additional 10 megahertz of public-private 
spectrum in the Frontline proposal help solve any shortage?
    Answer. While New York City appreciates every effort to make more 
spectrum available for public safety use, it must be noted that public 
safety would have access to this spectrum on a shared basis with 
commercial providers. Details regarding the nature of the network being 
contemplated, and how this sharing arrangement would work, were not 
provided in the Frontline proposal (nor in the information that is 
available about the yet to be released FCC Report and Order). 
Consequently, I am not in a position to assess whether, or to what 
extent, this 10 MHz of spectrum might address the shortage of public 
safety spectrum.

    Question 3. As you are all aware, one of the biggest problems 
facing public safety is interoperability. All too often, we see 
jurisdictional and technological barriers that inhibit public safety 
officials in one area from speaking to officials in an adjoining area. 
Of the solutions currently before the FCC, which solution does the most 
to foster interoperability?
    Answer. Prior to addressing the specific question regarding which 
of the proposed solutions might be preferable from an interoperability 
perspective, let me first touch upon a misconception about 
interoperability in the context of emergency response. Interoperability 
does not mean that everyone with a radio or data device must be capable 
of communicating on the same frequency with everyone who has a radio or 
data device. This would lead to chaotic, rather than interoperable, 
communications. Interoperability means managed access via pre-defined 
protocols within a disciplined command and control structure. 
Designated individuals, including command and control officials, 
communicate with each other and, then, to their respective ``ranks.'' 
Interoperability requires detailed, advanced planning and coordination 
between local first responders to implement communications protocols. 
Consequently, in looking at any of the proposed solutions, it is 
important to bear in mind that having an appropriate network 
infrastructure in place (which may not necessarily require having all 
users on a common frequency) is just one part of resolving the 
interoperability puzzle. A nationwide network is not a ``magic bullet'' 
to achieving interoperability. Most of the required work involves 
planning at the local and regional levels, prior to an event, to ensure 
that the appropriate agencies are communicating with one another in a 
coordinated manner during an emergency.
    Setting aside, for the moment, the practical concerns about 
deploying a nationwide network, which I raised in my testimony, I would 
suggest that theoretically each of the proposals have the potential to 
contribute to improving interoperability. From an infrastructure 
perspective, the key to ensuring that interoperability becomes a 
reality is to ensure that the true first responders (i.e., the 
emergency officials who command incident response) have control in 
designing the network in such a way as to meet their needs. Then, the 
work of developing the appropriate communication protocols is needed.

    Question 4. If a public-private partnership--of some sort--is 
formed to manage a portion of the spectrum, how should disputes between 
public safety users and private entities be resolved?
    Answer. The City does not believe that such a responsibility should 
be delegated to nongovernment entities, such as private mediators or 
administrators, nor should all such disputes be resolved at the Federal 
level without input from local entities. Given that many of the 
disputes will involve local or regional matters, any dispute resolution 
mechanism must allow for input from the affected local/regional public 
safety entities. A ``top down'' approach involving only a national 
public safety licensee and a national commercial licensee will not 
account for the legitimate needs of local first responders, who are 
ultimately the first on the scene in any emergency. The FCC must 
establish a process that is both expeditious and allows for local 
input.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                            Richard J. Lynch
    Question 1. What lessons can be learned from the recent Advanced 
Wireless Service (AWS) auction about the proper geographic size of 
license areas? Should we be concerned that 153 of the 168 eligible 
bidders in the AWS auction failed to even bid on large, Regional 
Economic Area Group licenses, which are often referred to as REAG 
licenses?
    Answer. An important lesson to be learned from the AWS auction is 
the value of the Regional Economic Area Grouping (REAG) licenses and 
the importance of a band plan that includes a mixture of license sizes, 
such as that just adopted by the FCC for the 700 MHz band.
    In the AWS auction, the demand for REAGs was much more intense than 
for the other, smaller license areas. The 40 MHz of spectrum that was 
auctioned as REAGs sold for an average of $.66 per MHz-POP. By 
contrast, Economic Areas (EA) licenses sold for $0.45 per MHz-POP, and 
Cellular Market Areas (CMA) licenses sold for only $0.39 per MHz-POP. 
Overall, EA prices were 32 percent below REAG prices, and CMA prices 
were 41 percent below REAG prices. These substantial price differences 
demonstrate the strong demand for large licenses.
    Finally, the 158 bidders mentioned above were primarily small and 
rural companies interested in only a few of the more than 1,000 
licenses available in that auction. The structure of the AWS auction 
was clearly successful in that, of these smaller bidders, more than 100 
actually won licenses.

    Question 2. Does the AWS auction also demonstrate that bidders can 
aggregate smaller license areas to create larger geographic footprints? 
Do smaller license areas result in a more aggressive build out of 
infrastructure within a license area?
    Answer. To a certain degree, bidders may be able to aggregate 
smaller licenses into larger geographic footprints. The questions are 
how efficient will that be, and will the bidder be able to aggregate 
enough spectrum to implement its business plan?
    In an auction with only small licenses, bidders wanting to 
implement a nationwide or regional strategy would be hampered by the 
exposure problem. That is, bidders would not be able to aggregate their 
preferred combination of licenses, either winning licenses that they do 
not need or not winning licenses they do need. If a band plan includes 
a mix of licenses, both large and small bidders benefit.
    A band plan of all small licenses could, in fact, impede an 
aggressive buildout. At least some large licenses in the mix will help 
promote nationwide deployment of new technologies by creating greater 
economies of scope and scale, which, in turn, result in lower prices 
for consumers.
    Band plans of smaller licenses will likely result in an uneven and 
even illogical coverage for the consumer. This happens because each 
individual licensee will build out to optimize the one specific license 
he/she holds. Since the typical consumer knows nothing of license 
boundaries and is only looking for contiguous coverage, such ``Swiss 
cheese'' coverage will frustrate the consumer. We have experienced this 
for years with current licenses and it is one of the big drivers for 
why some carriers, attempting to be responsive to consumer frustration, 
attempt to buy smaller licenses and eliminate the ``Swiss cheese'' 
holes. With larger licenses, logical and contiguous build outs can be 
achieved much sooner and will minimize such customer frustrations.
    History has also shown, almost without exception, that carriers 
aggregate smaller-sized licenses so that they can achieve and operate 
as viable businesses, enabling them to compete and deliver better 
products at lower prices to consumers. Aggregating spectrum post 
auction takes many years and is expensive to carriers and costly to 
consumers. To avoid these costly delays and ensure that next generation 
wireless networks are a near-term reality, the FCC must auction and 
license sufficient spectrum on a REAG basis.

    Question 3. If one goal of the auction of 700 megahertz spectrum is 
to encourage bidder participation, would smaller block sizes help in 
that regard?
    Answer. The band plan that the Commission just adopted for 700 MHz 
should be more than enough licenses to encourage bidder participation.
    FCC auction history shows us that there is not as much demand for 
CMAs as for larger licenses. Not only did the large AWS licenses sell 
for more per MHz-POP than the small licenses, but it took three 
separate auctions to sell the 12 MHz CMAs that the FCC sold in the 
lower 700 MHz band. At the first auction of these licenses, which the 
FCC held the in 2002 at the request of small businesses and rural 
telcos, more than one-third of the licenses didn't receive a bid.

    Question 4. Given recent testimony before the Committee regarding 
the spotty nature of wireless coverage in places like Maine, what 
mechanisms can the FCC use to ensure that new operators extend coverage 
ubiquitously? What effect would a so-called ``keep-what-you-use'' 
mechanism have in which a licensee would, over a reasonable period of 
time, be required to either provide service or return parts of a 
license area to the Commission for reauction?
    Answer. Service to rural areas is not blocked by lack of spectrum, 
and as such a ``keep what you use'' or benchmark requirements would do 
little to extend coverage into more rural areas. In most rural areas, 
it is not economically feasible to make use of all spectrum in every 
square mile of geography according to a regulatory mandated timetable. 
It is unlikely that services to rural areas are being denied or 
unreasonably delayed because interested entities lack access to 
spectrum. Rather, a lack of market incentives to build-out a network is 
the real problem.
    We believe that marketplace dynamics--not prescriptive regulation--
have worked to extend service in rural areas. Wireless carriers build 
out where people are. Indeed, rural wireless coverage has continued to 
expand and investment in rural areas has continued to grow long after 
the original cellular licensees were required to build out their 
networks or lose parts of their geographic area licenses.
    The Commission has other tools at its disposal that are better 
suited to encourage rural deployment. The Commission's substantial 
service safe harbors, for example, provide increased certainty for how 
carriers can meet the substantial service requirement through 
deployment in rural areas.
    If Congress believes that the current pace of deployment in rural 
America still lags behind its goals, then it would be far more 
effective to direct the Commission to use the economic tools at its 
disposal, rather than a policy of seizing unbuilt spectrum. The FCC 
could award bidding credits for carriers who choose to meet their 
substantial service requirement through the rural area safe harbor. Or 
the FCC could develop a program similar to programs available to rural 
utilities, designed to target areas for wireless investment.

    Question 5. Are the commercial frequencies that will be made 
available in the upper and lower 700 megahertz bands equally viable for 
mobile broadband uses? Does the fact that the Commission may allow 
high-power operations in certain blocks of the lower 700 megahertz band 
frequencies raise any concerns about interference in adjacent blocks? 
Would larger license areas in the lower 700 megahertz band be as 
attractive as large license areas in the upper 700 megahertz band?
    Answer. The upper and lower 700 MHz bands have comparable 
characteristics that would enable them to be used for mobile broadband 
systems and to provide wide-area and in-building coverage. Both would 
also facilitate more economical deployment in rural areas, as compared 
to existing spectrum bands used for commercial mobile systems (850 MHz 
cellular and 1.9 GHz PCS).
    Operation of high-powered broadcast systems can cause harmful 
interference to commercial mobile systems if operated in close physical 
proximity. This problem is especially acute if both systems use the 
same radio spectrum, e.g., operating on the same channel in adjacent 
markets. However, there is also a potential for interference if the two 
disparate systems operate on adjacent spectrum. The Commission 
recognized the incompatibility of mobile and broadcast systems when it 
adopted its recent Report and Order in April of this year. At that 
time, it modified its 700 MHz rules to prohibit the lower A and B 
blocks from being used for high-power broadcast services. (Note: The 
lower C and D block licenses, which have already been auctioned, and 
the unauctioned and unpaired E block may continue to be used for high-
powered systems). These changes will reduce the potential for 
interference in the lower 700 MHz band and will make the band 
significantly more suitable for mobile broadband systems.
    Verizon Wireless believes that larger license areas provide 
significant benefits over smaller areas, regardless of whether they are 
made available in the lower or upper 700 MHz bands.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. John F. Kerry to 
                            Richard J. Lynch
    Question 1. If Verizon plans to fully use spectrum won in the 700 
MHz auction, then why does it oppose ``use it or lose it'' rules?
    Answer. Verizon Wireless is committed to rapid roll-out of 
services. We believe that micro-managing carrier build-out goes against 
everything we have learned about market-based regulation.
    In particular, geographic coverage and so-called ``use it or lose 
it'' or ``keep what you use'' mandates could be in conflict with the 
FCC's market-driven policies for CMRS. That being said, in the recent 
700 MHz proceeding, we opposed strict geographic build out requirements 
as unnecessary, believing that such rules would skew economic 
investment to the ultimate detriment of the consumer, but actually 
proposed a build out rule with a ``keep what you use'' component.
    Our build-out proposal for the 700 MHz spectrum was more stringent 
than any other build-out requirement imposed by the FCC on commercial 
market area licenses.
    We proposed a population-based build out with a provision that if 
the licensee did not reach at least 75 percent of the POPS in its area 
at the end of its license term, it would lose the entire uncovered area 
of its license.
    A population based coverage requirement can promote a faster build 
out because the operator is generating revenue from serving people 
instead of a designated land mass. The revenue generated helps the 
operator fund more build out in the licensed area.

    Question 2. Do you think competition in the wireless market has 
been good for consumers? Do you think it has been good for the 
industry? What do you make of the vertical consolidation in the 
wireless industry, can the market still be competitive in these 
circumstances?
    Answer. Competition has been a boon to consumers. In its annual 
report to Congress on the state of competition in the wireless 
industry, the FCC has chronicled the positive impact of competition on 
the consumer. Most notable is that since 1995, the price of service has 
dropped precipitously, from $.43 per minute to $.07 per minute in 2005. 
This price drop is only the tip of the iceberg--in 1995, the consumer 
had minimal choices in terms of carriers, handsets and services. Now 
there is much more available to the U.S. wireless consumers, in terms 
of coverage, devices, and advanced services.
    There is no vertical integration in the wireless industry similar 
to the vertically integrated AT&T/Western Electric relationship at the 
time of the FCC's Carterfone decision. In fact, no wireless service 
provider in the United States manufactures wireless devices and the 
market for those devices is fiercely competitive. Across the United 
States, there are currently more than 800 wireless phones and devices 
available to consumers, from nearly three dozen manufacturers. The four 
national wireless carriers currently offer a total of more than 100 
phones, 95 percent of which are unique to a single provider.
    A number of innovative new devices, by new manufacturers, such as 
Apple's iPhone and HP's iPAQ Voice Messenger are entering the market. 
Major handset manufacturers like Motorola are facing an extremely 
competitive environment and face strong pressure to keep prices low 
while continuing to innovate. Wireless carriers must compete vigorously 
to provide consumers with the most advanced and desired devices, given 
the carrier's particular business model, technology constraints, and 
the competitive availability of various phones.

    Question 3. If Verizon and other incumbent broadband service 
providers win most of the auctioned spectrum, is there any guarantee 
that a third broadband competitor will be able to enter the market?
    Answer. Multiple wireless carriers, both with and without ties to 
incumbent LECs, are making enormous investment in wireless broadband 
infrastructure in various parts of the spectrum today, and will 
continue to do so in the recently licensed AWS spectrum and soon to be 
auctioned 700 MHz spectrum.
    Verizon Wireless invested billions to deploy its EV-DO Rev. A 
wireless broadband service on its currently licensed spectrum. 
Moreover, CTIA reports that other carriers deploying high-speed 
offerings include: Sprint (EV-DO covering more than 200 million people 
now and rising to 280 million by the end of next year); Alltel (EV-DO 
to more than 44 million people in more than 100 cities); AT&T (HSDPA to 
73 of the top 100 markets); T-Mobile (deploying HSDPA).
    Sprint has begun constructing a next-generation mobile wireless 
broadband network (WiMax) that it claims will reach 100 million 
consumers by the end of 2008. It just announced that it would be 
joining with startup wireless-Internet firm Clearwire Corp., founded by 
telecom pioneer Craig McCaw, in building what would be the Nation's 
first mobile network based on fast WiMax technology.
    Cable companies, which were major license winners in the 2006 
spectrum auction, plan to deploy next-generation wireless services to 
complement their current broadband offerings.
    Companies such as T-Mobile, Earthlink, Google, and even AT&T are 
investing in the deployment of WiFi. It is therefore no surprise that 
WiFi is more prevalent in the United States than anywhere else in the 
world, with the United States, accounting for approximately one-third 
of all WiFi hot spots worldwide.

    Question 4. What are your plans to deploy broadband to rural and 
underserved communities? How will you build out your network to ensure 
all Americans are served?
    Answer. Verizon Wireless continues to expand its coverage in rural 
America both through aggressive build out of our existing licenses as 
well as acquisition of rural licenses and customers.
    Nearly half the counties where Verizon Wireless has substantial 
coverage (defining substantial as covering more than 25 percent of the 
geography of the county) are ``rural'' under the FCC's definition of 
less than 100 people per square mile.
    We recently acquired several properties in rural West Virginia and 
just announced the acquisition of Rural Cellular Corporation, a company 
that built its business on serving rural areas across the country.
    Not just Verizon Wireless, but all carriers continue to spend 
capital and build throughout the United States, including rural 
America. The FCC's reports to Congress indicate that carriers spent $25 
billion on capital expenditures in 2005, a substantial increase over 
2004. That same report documented that 98 percent of the U.S. 
population lives in counties with three or more mobile carriers. 
Without regulatory mandates, carriers continue to invest in extending 
the scale and scope of their networks and those networks--including 
advanced services--are reaching the Nation's rural population.

    Question 5. Do you think that your customers should be free to use 
any device on your wireless networks, provided that the device is 
certified to not harm the network?
    Answer. We have concerns about attaching subscriber-supplied 
devices to the Verizon Wireless network.
    Putting aside generally recognized harms such as radio interference 
to other users and viruses, snoopware, and malware, we would have 
concerns about devices that demand a disproportionate amount of scarce 
spectrum resources. Such devices make it more difficult and more 
expensive for us to serve other users. We would also have concerns 
about devices that are not E-911 compliant, or may not meet other 
regulatory obligations that are the carrier's responsibility under the 
FCC rules.
    Finally, a very important part of our internal device certification 
process is achieving a high quality user experience. If use of a 
foreign device fails to satisfy a consumer, the network operator may 
still be blamed, and for something it cannot fix. That's not how 
Verizon Wireless has achieved the high marks for customer satisfaction 
that we enjoy today. We provide reliability and a superior user 
experience, and we would like to continue to do so, even if subscribers 
are allowed to bring foreign devices to the network.

    Question 6. How would anonymous bidding prevent anti-competitive 
behavior, thereby increasing auction revenue?
    Answer. We are pleased that the Commission appears to have adopted 
anonymous bidding rules without an ``eligibility ratio threshold'' for 
the 700 MHz auction.
    Imposing limitations on the release of bidder information prior to 
and during the course of an auction ensures that bidders will be 
appropriately focused on the licenses and their value, not on other 
bidders and their bidding strategies.
    Disclosure of bidder information beyond that required to comply 
with the Commission's rules is at best unnecessary and, at worst, may 
facilitate bid signaling or other collusive behavior.
    Anonymous bidding rules will prevent strategies whose sole purpose 
is to block a bidder from aggregating licenses at auction.
                                 ______
                                 
     Response to Written Question Submitted by Hon. Bill Nelson to 
                            Richard J. Lynch
    Question. Proponents of all open access policy for portions of the 
700 megahertz spectrum have noted that open access could bring about 
new innovative technologies and applications. Can the members of the 
panel provide some examples of these technologies and applications? 
Also, are there any pitfalls of an ``open access'' approach?
    Answer. I assume that by ``open access'' you refer to the proposal 
that a wireless carrier must permit users to attach devices of their 
choosing, with applications of their choosing, to the licensee's 
network. Open access requirements risk significant harm to the network 
which negatively impacts the quality of service provided to our 
customers.
    Open access requirements could impair the ability of the carrier to 
manage its network to accomplish essential tasks such as maximizing 
spectrum efficiency and optimizing service quality. Open access will 
present the carrier with numerous network operational problems that 
must be resolved for the ``open'' regime. Open access could take away 
the carrier's ability to use proprietary network applications and 
controls that would limit the introduction of viruses, malware and 
snoopware, and prevent illegal downloads and invasions of subscriber 
privacy.
    Currently, wireless devices and networks are designed to work 
closely to optimize reliable performance, spectrum efficiency, and 
network security. Moreover, the integration of devices and network has 
allowed Congress and the FCC to achieve numerous public interest goals, 
including deployment of wireless E-911 and wireless number portability, 
increased availability of hearing aid compatible wireless devices, and, 
most recently, the future availability of wireless emergency alerts 
pursuant to the WARN Act. If a user can supply a device to attach to 
the network, and can decide what features and functions to download to 
the device, there is simply no guarantee that resulting device will not 
degrade network performance or will comply with these regulatory 
mandates.
    Consumers will also likely see increased prices for ``open'' 
devices. Currently, we offer subsidies to subscribers for handsets that 
are designed and certified to work on our network. When consumers buy 
handsets from others they will likely pay full retail prices a 
significant increase over what consumers pay today.
    ``Open access'' proposals present significant problems because they 
ignore the enormous efforts and resources that a wireless network 
operator must expend in order to provide a secure environment and 
reliable network performance.
                                 ______
                                 
Response to Written Questions Submitted by Hon. Frank R. Lautenberg to 
                            Richard J. Lynch
    Question 1. You advocate large license blocks and large geographic 
areas. Will that approach advantage large companies and disadvantage 
new entrants who can't afford to bid on such large blocks or does your 
plan have sufficient flexibility to serve both?
    Answer. The 700 MHz band plan recommended by Verizon Wireless 
contains a mix of licenses for large and small service areas as well as 
large and small spectrum blocks. This approach provides opportunities 
for companies of all sizes, existing operators or new entrants, to 
acquire spectrum and pursue their specific business plans. The 
Commission appears to have adopted a plan that takes such an approach.
    The FCC's past auctions have demonstrated the benefits of both 
large spectrum blocks and large market sizes. The recent Advanced 
Wireless Service auction, concluded last summer, used a broad mix of 
licenses and was very successful.
    Larger spectrum blocks are important to enable operators to use 4G 
technologies to provide the greatest possible benefit for consumers. A 
20 MHz or larger block, for example, is needed, to provide the fastest 
data rates possible.
    Larger licenses will help promote nationwide deployment of new 
technologies by creating greater economies of scope and scale, which, 
in turn, result in less expensive equipment and lower prices for 
consumers.
    Consumers demand nationwide service and carriers must meet that 
demand. History has also shown, almost without exception, that carriers 
aggregate smaller-sized licenses so that they can achieve and operate 
as viable businesses, enabling them to compete and deliver better 
products at lower prices to consumers. Aggregating spectrum post 
auction takes many years and is expensive to carriers and costly to 
consumers. To avoid these costly delays and ensure that next generation 
wireless networks are a near-term reality, the FCC must auction and 
license sufficient spectrum on a REAG basis.

    Question 2. Some have argued that there should be limits on bids 
for spectrum by providers like Verizon Wireless in order to make way 
for new market entrants. How would Verizon Wireless use the 700 
megahertz spectrum in addition to the spectrum it already controls?
    Answer. There is no basis for excluding or limiting participation 
of providers like Verizon Wireless. On the contrary, we and other 
wireless providers have proven track records of designing and deploying 
highly sophisticated communications networks. Every year in its CMRS 
competition reports, the Commission has pointed to the vigorous 
competition in the CMRS market that has resulted from the competing 
networks built by these and many other companies. Although other 
entities could obtain the necessary financial resources and technical 
experience to deploy such complex networks, there is no basis for 
barring current providers of communications services from the auction.
    We make the best possible use of the limited cellular and PCS 
spectrum we have and believe we are the most efficient spectrum user in 
the Nation. In fact, Verizon Wireless uses less spectrum to serve more 
customers than any other carrier in the industry, 50 percent more 
customers per MHz than the industry average. Such efficiencies will 
drive any future use of spectrum.
    The upcoming auction will enable the development and wide 
deployment of new fourth generation--or ``4G''--wireless technologies 
and services that will yield tremendous benefits to consumers, 
businesses, and first responders alike.
    Verizon Wireless' mobile broadband network, the first in the 
Nation, is available to more than 200 million people who can access 
broadband services on their laptops, e-mail on their PDAs, and V-CAST 
Video and Music on their wireless phones, supporting data rates of 
hundreds of kilobits per second and a wide variety of mobile 
applications. We are now deploying the latest enhancement to CDMA 
technology, EV-DO Revision A, which will increase data speeds further 
and support new broadband applications.
    New ``4G'' technologies are being developed that will support 
mobile data rates of tens of megabits per second. They will unleash a 
host of new broadband applications that will rival anything available 
today on wired broadband networks. Doctors will be able to access 
medical records and CAT scans wirelessly; firefighters will have 
wireless access to images of building interiors and floor plans.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                             Michael Small
    Question 1. What lessons can be learned from the recent Advanced 
Wireless Service (AWS) auction about the proper geographic size of 
license areas? Should we be concerned that 153 of the 168 eligible 
bidders in the AWS auction failed to even bid on large, Regional 
Economic Area Group licenses, which are often referred to as REAG 
licenses?
    Answer. The success of the AWS auction shows that the pool of 
potential bidders is largely interested in smaller markets. There are 
several reasons for this interest. First, many existing carriers seek 
to augment their spectrum holdings in targeted areas to serve 
increasing demand for voice and information services. Other carriers 
seek incremental additions to their service footprints so they can 
exploit population shifts and development related to their existing 
licensed service territory. Some carriers seek to exploit markets 
connected to their existing businesses or related to their presence in 
the service area. These carriers often believe that their close 
connection with a particular area gives them an advantage in the 
marketplace. Those carriers who seek very large--or even national--
markets are carriers who already have a nationwide presence. By 
definition, there are but a few of these carriers and designing 
auctions that predominately offer large geographic license areas 
necessarily reduces the number of bidders because of the acquisition 
costs, development costs, and lack of interest in large licenses by 
most bidders.

    Question 2. Does the AWS auction also demonstrate that bidders can 
aggregate smaller license areas to create larger geographic footprints? 
Do smaller license areas result in a more aggressive build out of 
infrastructure within a license area?
    Answer. There is no doubt that licenses can be easily aggregated. 
Since the introduction of cellular service, assorted carriers have 
aggregated licenses in various combinations. The four largest wireless 
carriers each acquired their extensive service areas through 
aggregation of cellular, PCS, and now AWS licenses. Nothing prevents 
further aggregation or various sorts of cooperative arrangements among 
carriers to extend service areas and product offerings.

    Question 3. If one goal of the auction of 700 megahertz spectrum is 
to encourage bidder participation, would smaller block sizes help in 
that regard?
    Answer. Smaller block sizes will encourage more bidders to enter 
the 700 MHz auction because these bidders can match territories to 
their existing markets, to contingent areas where population growth and 
development have spread from the core areas of existing service areas, 
or because new bidders can match their financial and business 
capabilities to the smaller territories.

    Question 4. Given recent testimony before the Committee regarding 
the spotty nature of wireless coverage in places like Maine, what 
mechanisms can the FCC use to ensure that new operators extend coverage 
ubiquitously? What effect would a so-called ``keep-what-you-use'' 
mechanism have in which a licensee would, over a reasonable period of 
time, be required to either provide service or return parts of a 
license area to the Commission for reauction?
    Answer. The problem of coverage in high cost, low population 
density areas like parts of Maine and elsewhere is a financial problem. 
The cost of building facilities in these areas cannot be justified by 
the amount of traffic available to support them. There is, of course, a 
program in place to deal with this problem: the high cost program of 
the Universal Service Fund. If the FCC wants to ensure coverage in 
these areas, it should continue to make USF support available to 
wireless carriers.

    Question 5. Are the commercial frequencies that will be made 
available in the upper and lower 700 megahertz bands equally viable for 
mobile broadband uses? Does the fact that the Commission may allow 
high-power operations in certain blocks of the lower 700 megahertz band 
frequencies raise any concerns about interference in adjacent blocks? 
Would larger license areas in the lower 700 megahertz band be as 
attractive as large license areas in the upper 700 megahertz band?
    Answer. Yes, we believe that commercial frequencies made available 
in both the upper and lower 700 MHz bands are viable for mobile 
broadband uses. Some parties have expressed concerns about the 
proximity of higher- and lower-power operations in 700 MHz, while other 
parties believe that proper coordination among licensees and power 
limits will address this concern. We have not taken a position on this 
issue. We believe it is important to have a mix of both large and small 
license service areas to accommodate a variety of potential licensees 
and services.
                                 ______
                                 
     Response to Written Question Submitted by Hon. Bill Nelson to 
                             Michael Small
    Question. Proponents of all open access policy for portions of the 
700 megahertz spectrum have noted that open access could bring about 
new innovative technologies and applications. Can the members of the 
panel provide some examples of these technologies and applications? 
Also, are there any pitfalls of an ``open access'' approach?
    Answer. There are at several pitfalls to the open access approach. 
First, if the winning bidders are required to open their networks to 
third parties to use any device or application of their choice and/or 
on a wholesale basis, potential bidders will naturally find the offered 
spectrum of less value as a result of these onerous conditions and bid 
accordingly. Second, it is unclear how such a policy would operate. Are 
carriers to offer wholesale access to the networks they construct, or 
are they to lease the bare spectrum for which they hold what has (up to 
now) been an exclusive license? Because wireless networks, in general, 
use one of two access modulation schemes, customers are still limited 
in the number of networks on which their handsets will work if resale 
of network access is what is intended. Moreover, even if wholesale 
access to bare spectrum is intended, the result forces a choice between 
competing access schemes if a customer is to have nationwide roaming 
capability. Finally, wireless networks are unique--and quite distinct 
from traditional, circuit-switched networks--in that they dynamically 
share limited spectrum and constantly adjust to account for growth and 
load factors. Because handsets are a functional part of the wireless 
network, introducing additional variables in the form of untested 
handsets and applications would harm network performance, create 
interference, and potentially limit carriers' ability to comply with 
critical obligations such as E-911 and CALEA. It is important to note 
that in this shared network environment, a single device or application 
can interfere with other users. By the time the interference is 
detected, however, the harm to the network and other users has already 
occurred and service quality to consumers suffers. In sum, I firmly 
believe that an open access approach is deeply misguided, would skew 
investment and innovation to the detriment of consumers, and should be 
rejected.
                                 ______
                                 
 Response to Written Question Submitted by Hon. Frank R. Lautenberg to 
                             Michael Small
    Question. You have expressed concerns that FCC requirements for a 
company to ``build-out'' and provide service to their entire spectrum 
area may not be economical. How can the FCC ensure that winning bidders 
use the spectrum, and do not just hold on to it to prevent competition?
    Answer. Current FCC rules require licensees to meet construction 
requirements at various points during the term of their licenses. These 
requirements are generally focused on covering percentages of 
population in the licensed service area and, as such, reflect the 
financial constraints of a capital construction program. These rules 
should be continued for holders of 700 MHz licenses. This will ensure 
that the licenses are put to use (and not warehoused) and provide 
service to a large percentage of the population covered by the license. 
For construction of facilities in high cost, hard to serve areas, the 
FCC should continue to allow wireless carriers access to the Universal 
Service Fund's high cost program. Access to these funds requires 
carriers to spend the support they receive in the areas for which they 
are earmarked.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                             Amol R. Sarva
    Question 1. How does the current marketplace for wireless services 
affect the development of wireless devices and applications?
    Answer. The wireless industry is ripe with opportunities for 
innovation and economic growth, but the ``Big 4'' carriers currently 
act as gatekeepers to block or deter many of these opportunities. An 
entrepreneur looking to create a new device or service that somehow 
touches one of their networks typically must go through an unduly 
burdensome ``certification process,'' which is driven more by the 
carrier's own self interest than any legitimate technical 
considerations. Consumers have lost out on the benefits of far too many 
innovations that failed to pass through the ``star chamber'' of the 
wireless incumbents' processes.

    Question 2. Is the trend toward wireless consolidation getting 
better or worse, and what effect would the adoption of an open access 
model have on competition in this area?
    Answer. Wireless consolidation is a worsening trend, as the Sprint/
Nextel and Cingular/AT&T, and other ``mega-mergers'' have dramatically 
changed the competitive landscape. Today, the top two carriers, Verizon 
and AT&T, control over half of the subscribers in the market. More 
importantly, they garner two-thirds of the ``net additions'' (i.e., new 
customers), so their market power is increasing. The FCC's most recent 
report on the subject found that the wireless industry's HHI index--a 
key measure of market concentration--has reached 2700, well above the 
1800 marker above which a market is considered ``highly concentrated.'' 
The HHI has increased about 600 points in the past 3 years it has been 
measured.
    By licensing a slice of spectrum in the 700 MHz band according to 
Open Access principles, the FCC could substantially alleviate the 
competitive harms of this remarkable consolidation. Whereas today the 
Big 4 carriers can choose which devices and applications succeed and 
which fail, with Open Access, entrepreneurs would be free to innovate. 
The only limits on new service ideas would be the entrepreneur's 
imagination, not the wireless operator's Terms of Service.

    Question 3. In your view, how would such a model be commercially 
viable for a network operator?
    Answer. There is great demand among consumers and businesses for a 
network operated according to Open Access principles. The incumbents, 
and particularly AT&T and Verizon, have resisted an Open Access model 
because they are vertically integrated carriers with a legacy business 
model to protect. A new entrant with an Open Access network will not be 
constrained by these concerns, and will thus be able to generate 
substantial revenues from device makers looking to add network 
connectivity, rural telephone companies eager for a partner to assist 
them in deploying wireless service to rural areas, and consumers who 
seek freedom from long-term contracts with costly termination fees (to 
name a few). Highlighting the commercial promise of an Open Access 
model, Google recently indicated its intention to commit a minimum of 
$4.6 billion in the 700 MHz auction if the FCC adopts ``specific, 
enforceable, and enduring'' rules for an open platform on a portion of 
that spectrum.

    Question 4. What consumer benefits would you expect?
    Answer. If the FCC allocates a slice of 700 MHz spectrum for Open 
Access, we envision a wave of opportunity in services, applications and 
devices. These innovations include the evolution of cell phones toward 
``broadband communicators'', the addition of wireless community 
features to portable media and gaming devices, and even using wireless 
to provide cheap connectivity to otherwise ``dumb'' appliances. We are 
starting to see these kinds of devices emerge with local area WiFi 
capabilities, but the possibilities are even greater once the devices 
can access the sort of wide-area 4G networks that will operate in the 
700 MHz band. Open Access will also bring wireless consumers a wealth 
of choices akin to the services that they currently enjoy via fixed 
Internet connections, such as video, user-generated content, VoIP, and 
social networking.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. John F. Kerry to 
                             Amol R. Sarva
    Question 1. Is there merit to the notion of ``open access'' and 
will it increase competition in the wireless market? If so, how? What 
companies will bid in this type of system?
    Answer. Open Access is an antidote to the sorry state of 
competition in the wireless market. Today, consumers are largely 
limited to the services and devices handpicked for them by the 
vertically integrated carriers like AT&T and Verizon. But if the FCC 
allocates a slice of 700 MHz spectrum according to Open Access 
principles, entrepreneurs will be free to bring new products and 
services to market. This means that a consumer won't be limited to 
Verizon's own offering or those of its business partners every time she 
wants to watch a mobile video, download a ringtone, or otherwise make a 
legitimate use of the network.
    In terms of bidders, we expect a vigorous auction for any 700 MHz 
spectrum licensed with an Open Access framework Indeed, Google recently 
announced that if the FCC adopts a truly open platform, it will commit 
no less than $4.6 billion to the auction. Moreover, even a bidder for a 
small geographic license will value that spectrum more highly if other 
licenses across the country are auctioned on an Open Access basis, as 
Open Access ensures that the bidder can access a national coverage area 
through roaming and other arrangements.

    Question 2. Opponents of open access say that it is a failed 
business model. Do you agree? Did it fail in the wireline industry? If 
so, why?
    Answer. The Open Access principles to which we refer have been 
wildly successful in the wireline market. For decades prior to the 
FCC's seminal Carterfone decision, consumers were prohibited from 
attaching any device to the telephone network unless it was expressly 
sanctioned (and sold) by Ma' Bell. Basically, the phone company kept 
competition at bay by arguing that it couldn't keep phone service 
running without ``absolute control'' over the network. Finally, in 
1968, the FCC called their bluff, and said that so long as a 
manufacturer shows that its device won't harm the network, there's no 
reason to keep it out of the hands of the public. As a result, we got 
the fax machine, the answering machine, the modem, and billions upon 
billions of dollars of new economic productivity. Carving out just a 
small slice of spectrum for a similarly open network in the 700 MHz 
band can unlock a wave of entrepreneurial energy for wireless and 
broadband users.

    Question 3. What benefits do smaller and rural wireless service 
providers have to gain from open access, that they will be denied if 
there is no open access requirement? What types of services can be 
rolled out in urban areas to compete?
    Answer. Smaller and rural wireless service providers will 
especially benefit from Open Access. As this Committee is aware, the 
current inability of many rural carriers to offer a national roaming 
service has stifled their ability to compete against larger carriers. 
For example, in comments to the FCC supporting Open Access in the upper 
700 MHz band, Cellular South noted that ``small and regional carriers 
find it increasingly difficult, if not outright impossible, to 
negotiate high-speed data roaming agreements with national wireless 
providers.'' Also, by attracting a new entrant, an Open Access 
framework will further the creation of a ``third pipe'' that will 
provide rural consumers with affordable and reliable broadband access.
    Open Access also holds promise for urban areas, where ``on-the-go'' 
consumers will obtain access to the same wealth of choices among IP-
based applications and services that today they can enjoy only at home, 
the office or their dorm room. The increased ability to bring new 
devices and applications to the wireless market will particularly 
benefit the economies of tech centers like Silicon Valley and the Route 
128 corridor.
                                 ______
                                 
     Response to Written Question Submitted by Hon. Bill Nelson to 
                             Amol R. Sarva
    Question. Proponents of all open access policy for portions of the 
700 megahertz spectrum have noted that open access could bring about 
new innovative technologies and applications. Can the members of the 
panel provide some examples of these technologies and applications? 
Also, are there any pitfalls of an ``open access'' approach?
    Answer. In short, an Open Access framework can deliver to the 
wireless market the same wealth of technologies and applications that 
today consumers can only enjoy when tethered to their PCs at home or 
work. It means that a consumer won't be limited to Verizon's own, 
limited offerings or those of its business partners every time she 
wants to watch a mobile video, download a ringtone, or otherwise make 
legitimate use of the network. Innovations in the near term include the 
evolution of cell phones toward ``broadband communicators'', the 
addition of wireless community features to portable media and gaming 
devices, and even using wireless to provide cheap connectivity to 
otherwise ``dumb'' appliances. And just as no one could predict that 
we'd get the fax machine and modem when the FCC adopted similar 
principles for the wireline market four decades ago, the wireless 
marketplace will experience innovations that today we could barely 
imagine.
    The only pitfall will come if the FCC adopts an allocation that is 
Open in name but which opens loopholes for the network owners to lock 
down devices and block content as they do today. As Google recently 
explained in comments to the FCC, the commitment to Open Access to 
which the licensee will be held must be specific, enduring, and 
enforceable.

                                  
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