United States Government Accountability Office

Washington, DC 20548 

November 10, 2005 

The Honorable Ted Stevens 

Chairman 

The Honorable Daniel K. Inouye 

Co-chairman 

Committee on Commerce, Science, and Transportation 

United States Senate 

The Honorable Joe Barton 

Chairman 

The Honorable John D. Dingell 

Ranking Minority Member 

Committee on Energy and Commerce 

House of Representatives 

Subject: Telecommunications: Preliminary Information on the Federal 

Communications Commission’s Spectrum Allocation and Assignment Process 

The radiofrequency spectrum is a natural resource used to provide an array of wireless 

communications services, such as mobile voice and data services, radio and television 

broadcasting, radar, and satellite-based services, which are critical to the U.S. economy 

and national security. Historically, concern about interference among users has been a 

driving force in the management of spectrum. The Federal Communications 

Commission (FCC)—an independent agency that regulates spectrum use for nonfederal 

users, including commercial users—and the National Telecommunications and 

Information Administration (NTIA)—an agency within the Department of Commerce 

that regulates spectrum for federal government users—have worked to minimize 

interference through the “allocation” and “assignment” of spectrum. Allocation involves 

designating “bands” of spectrum for specific types of services or classes of users, such as 

designating certain bands for commercial use and others for government use.1

 

Assignment provides an authorization or license to use a specific portion of spectrum to 

entities, such as wireless companies. 

Demand for the radiofrequency spectrum has exploded over the past several decades as 

new technologies and services have been and continue to be brought to the market in the 

private sector and new mission needs unfold among government users of spectrum, 

including wireless communications critical for public safety officials responding to 

 1

In addition to allocation, FCC also specifies service rules which include, among other things, the technical and

operating characteristics of equipment. 

 GAO-06-212R FCC Spectrum Allocation and Assignment Process 
natural and man-made disasters. As a result, nearly all parties are becoming increasingly 

concerned about the availability of spectrum for future needs, because most of the 

usable spectrum in the United States has already been allocated to existing services and 

users. Therefore, to promote a more efficient use of this resource and meet future 

needs, FCC has increasingly adopted more market-oriented approaches to spectrum 

management in recent years, including using a competitive bidding process, or auctions, 

to assign spectrum to commercial users. Prior to auctions, FCC had used comparative 

hearings, which were quasi-judicial forums, and lotteries as assignment mechanisms. 

Since 1994—the first full year FCC was authorized to use auctions—FCC has held 59 

auctions for over 56,000 licenses to select between competing applications for the same 

license or spectrum.2

The Commercial Spectrum Enhancement Act required us to examine FCC’s commercial 

spectrum licensing process and report findings to the committees of jurisdiction by 

September 19, 2005.3

 As discussed with the committees of jurisdiction, we examined the 

(1) characteristics of the current spectrum allocation process for commercial uses; (2) 

impact of the assignment process, specifically the adoption of auctions to assign 

spectrum licenses, on end-user prices, investment, entry and participation of small 

businesses, and competition; and (3) options for improving spectrum management. To 

address these issues, we reviewed and synthesized relevant economic, legal, and policyoriented literature, such as the Spectrum Policy Task Force report, a document 

produced by FCC staff. In addition, we hosted, in conjunction with the National 

Academies, two expert panels with 23 experts representing academia, government, and 

industry. The experts discussed policy issues related to spectrum allocation and 

assignment, as well as options for improving spectrum management in the future. To 

obtain a range of perspectives on assignment and allocation issues, we also conducted 

semistructured interviews with representatives and officials from academia, government, 

and industry. We also analyzed data from FCC’s three primary spectrum license 

databases: Universal Licensing System (ULS), Consolidated DataBase System (CDBS), 

and International Bureau Filing System. To determine the reliability of the information 

from these databases, we interviewed officials at the Wireless, Media, and International 

Bureaus within FCC about their data collection and verification policies and procedures 

for license information and electronically tested the ULS and CDBS databases. We 

concluded that information from FCC’s license databases was sufficiently reliable to 

enable us to answer our objectives. We conducted our work from March through August

2005 in accordance with generally accepted government auditing standards. 

In September and October 2005, we briefed the Senate Commerce Committee staffs and 

provided copies of the briefing materials to the House Commerce Committee staffs, 

respectively. As requested, this report summarizes and transmits that briefing. The full 

briefing is included in enclosure I. We plan to issue a final report on this work in 

December 2005. 

 2

The Omnibus Budget Reconciliation Act of 1993 (Pub. L. No. 103-66, § 6002, 107 Stat. 312, 387-392) added 

Section 309(j) to the Communications Act, as amended. Section 309(j) authorizes FCC to use competitive bidding 

to assign licenses for certain services. 3

Pub. L. 108-494,118 Stat. 3986, tit. II (2004). 

Page 2 GAO-06-212R FCC Spectrum Allocation and Assignment Process 
Summary 

The current practice of allocating spectrum is largely regarded as being a “commandand-control” process—that is, the government largely dictates the use of spectrum. In 

particular, based on regulatory judgments, FCC determines and limits what types of 

services—such as broadcast, satellite, or mobile radio—will be offered in different 

frequency bands by geographic area. In addition, FCC issues service rules to define the 

terms and conditions for spectrum use within given bands. These rules typically specify 

eligibility standards, as well as limitations on the services that relevant entities may offer 

and the equipment and power levels they may use. Stakeholders we spoke to and 

panelists on our expert panel identified a number of weaknesses with the command-andcontrol process. For example, panelists and stakeholders noted that it is slow, and 

sometimes leads to underutilization of the spectrum. In the Spectrum Policy Task Force 

Report, FCC staff identifies two alternative spectrum management models that would 

allow it to move away from a command-and-control approach to allocation: the 

“exclusive, flexible rights” model, and the “open-access, or commons,” model. The 

exclusive, flexible rights model provides licensees with exclusive, flexible use, and 

transferable rights within defined geographic areas. In contrast, the open-access model 

allows an unlimited number of unlicensed users to share frequencies, with usage rights 

governed by technical standards. Both models are more market-oriented than the 

command-and-control model—that is, supply and demand for spectrum-based services 

would play a greater role in determining how spectrum is used, or allocated. FCC is 

currently using elements of each model. For example, in recent years, FCC has provided 

significant operational and technical flexibility for many commercial radio services, such 

as personal communications service (PCS) and advanced wireless services. However, 

there is limited consensus about fully adopting either alternative model in the future. 

Recognizing that the two alternative models are not necessarily mutually exclusive, 

many stakeholders and panelists on our expert panel support mixed approaches to 

spectrum management that would combine elements of both models. 

Available evidence suggests that FCC’s use of auctions has had little to no negative 

impact on end-user prices, investment, and competition; evidence on the impact on entry 

and participation of small businesses is less clear. According to economic research and 

many of the industry stakeholders we spoke with, auctions have little to no effect on 

end-user prices because the auction payments represent a sunk cost,4

 which do not affect 

future-oriented decisions, such as pricing decisions. Similar arguments were made for 

the impact of auctions on investment. In addition, some industry stakeholders told us 

that companies’ drive for a return-on-investment (i.e., they need to earn a return on the 

auction payment) and competition induces companies to invest and innovate. Thus, 

rather than diverting resources from investment and innovation, auctions encourage 

these actions. Many industry stakeholders also told us that auctions generally do not 

place companies at a competitive or financial disadvantage compared with companies 

that acquired licenses through means other than auction. These stakeholders noted that 

many licenses initially assigned through a process other than auction have been resold or 

 4

Sunk costs are costs that have been incurred and cannot be reversed, for example, paying for spectrum rights at an 

auction. 

Page 3 GAO-06-212R FCC Spectrum Allocation and Assignment Process 
that companies that acquired licenses via means other than auction have subsequently 

acquired additional licenses via auction; therefore, any competitive advantage these 

companies gained by obtaining licenses through other means have dissipated. The 

evidence is less certain regarding the effect of auctions on entry and participation of 

small businesses. For instance, many industry stakeholders we interviewed stated that 

auctions limit participation to large companies with extensive financial resources. 

However, others noted that large companies tended to also dominate the comparative 

hearing process and that auctions at least make the process transparent. In addition to 

auctions, companies can obtain licenses on the secondary market, which is the sale or 

lease of licenses among private entities. FCC has recently taken steps to facilitate 

secondary market transactions, including streamlining the leasing approval process. 

Industry stakeholders and panelists on our expert panel offered a number of options for 

improving spectrum management. The most frequently cited options include (1) 

reexamining the distribution of spectrum to enhance the efficient and effective use of 

this important resource, (2) ensuring clearly defined rights and flexibility in 

commercially licensed spectrum bands, and (3) extending and modifying FCC’s auction 

authority. For example, a number of panelists suggested that the government evaluate 

the relative allocation of spectrum for government and commercial use as well as the 

allocation of spectrum for licensed and unlicensed purposes. There was no consensus 

on these options for improvements among stakeholders and panelists on our expert 

panel, except to extend FCC’s auction authority. Twenty-one of 22 panelists supported 

extending FCC’s auction authority, which is scheduled to expire in 2007.5

 

Agency Comments 

We provided a draft of this report to FCC, NTIA, and the Office of Management and 

Budget (OMB) for their review and comment. FCC provided technical comments that 

we incorporated where appropriate. NTIA had no comments on the draft and OMB 

provided no comments. 

- - - - 

We are sending copies of this report to the appropriate congressional committees. We 

are also sending this report to the Secretary of Commerce, Chairman of the Federal 

Communications Commission, and the Director of the Office of Management and Budget. 

We will also make copies available to others upon request. In addition, the report will be 

available at no charge on the GAO Web site at http://www.gao.gov. 

 5

At the end of each expert panel session, we asked the panelists to individually answer a short series of questions

about the topics discussed in order to more systematically capture individual panelist views on key dimensions. 

Twenty-two of the 23 panelists responded to the questions we posed at the end of each session. 

Page 4 GAO-06-212R FCC Spectrum Allocation and Assignment Process 
Should you have any questions about this report, please contact me at 202-512-2834 or 

heckerj@gao.gov. Contact points for our Offices of Congressional Relations and Public 

Affairs may be found on the last page of this report. Individuals making key 

contributions to this report include Amy Abramowitz, Stephen Brown, Emilie Cassou, 

Michael Clements, Nikki Clowers, Kate Magdalena Gonzalez, Eric Hudson, Terri Russell, 

Mindi Weisenbloom, and Alwynne Wilbur. 

JayEtta Z. Hecker, 

Director, Physical Infrastructure Issues 

Enclosure 

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Enclosure 

Radiofrequency Spectrum Management

Briefing for Congressional Committees

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Enclosure 

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• Introduction to mandate, objectives, and scope and

methodology

• Background on spectrum management

• Objective 1: Spectrum allocation

• Objective 2: Spectrum assignment

• Objective 3: Panelists’ and stakeholders’ suggestions

for improvement

• Summary 

• Attachments

Contents

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Enclosure 

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Introduction

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Enclosure 

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The Commercial Spectrum Enhancement Act

1 required that GAO review

commercial spectrum license policy, as implemented by the Federal 

Communications Commission (FCC). The act required that GAO report 

to the committees of jurisdiction by September 19, 2005.

On the basis of the mandate’s language and discussions with staff from 

multiple committees, we identified the following three objectives:

Mandate and Objectives

1. What are the characteristics of the current spectrum allocation

process for commercial uses?

2. How has the adoption of auctions to assign spectrum licenses

affected end-user prices, investment, entry and participation of 

small businesses, and competition?

3. What options for improving spectrum management have been 

suggested?

1Public Law 108-494, tit. II (2004).

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Enclosure 

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• We hosted, in conjunction with the National Academies, 2 expert

panels with 23 individuals representing academia, government, and 

industry in August 2005. (See attachment I for a list of panelists.)

• We conducted semistructured interviews with over 30 

representatives of academia, government, and industry.

• We reviewed relevant economic, legal, and policy-oriented 

literature.

• We analyzed data from FCC’s three primary spectrum license 

databases.

• We conducted our work from March through August 2005 in 

accordance with generally accepted government auditing 

standards. 

Scope and Methodology

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Enclosure 

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Background

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What is radiofrequency spectrum?

Radiofrequency spectrum is the medium that enables wireless

communications critical for commercial enterprises and government 

agencies.

• Commercial enterprises use spectrum to provide a variety of 

wireless services, including mobile voice and data, broadcast

television and radio, and satellite services, in addition to a variety

of private tasks. 

• Government agencies use spectrum to fulfill a variety of missions, 

including national defense, aviation communication, public safety, 

and weather services. 

Definition

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Spectrum is managed at the international and national levels.

• The International Telecommunications Union (ITU), a specialized agency of 

the United Nations, coordinates spectrum management decisions among

nations.

• In the United States, responsibility for spectrum management is divided:

• FCC regulates spectrum use for nonfederal users, including 

commercial, private, and state and local government users under

authority provided in the Communications Act. 

• The National Telecommunications and Information Administration

(NTIA) manages spectrum use for federal government users and acts

for the President with respect to spectrum management issues. NTIA has directed federal agencies to use only as much spectrum as they 

need to promote efficiency in the federal spectrum it manages. 

• FCC and NTIA, with direction from the Congress, jointly determine the

amount of spectrum allocated to federal and nonfederal users. (See

graph on next page for the current allocation between federal and

nonfederal users.)

• The Department of State coordinates the views of FCC and NTIA to reach a 

U.S. position on spectrum issues for international discussions.

Management of Spectrum

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Enclosure 

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Federal and Nonfederal Spectrum

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Historically, concern about interference among users has been a 

driving force in spectrum management. 

Spectrum managers allocate and assign spectrum so as to minimize

interference. 

• Allocation involves designating “bands” of spectrum for specific

types of services. Spectrum managers also specify the service 

rules, which include the technical and operating characteristics of 

equipment.

• Assignment involves providing an authorization or license to use 

a specific portion of spectrum to entities, such as commercial 

enterprises or government agencies.

Allocation and Assignment

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Enclosure 

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When a portion of spectrum is assigned to a single entity, the license 

is considered exclusive. When two or more entities apply for the 

same exclusive license, FCC classifies these as mutually exclusive 

applications—that is, the grant of a license to one entity would 

preclude the grant to one or more other entities.

For mutually exclusive applicants, FCC has used three primary

assignment mechanisms:

(1) Comparative hearings, used principally from 1934 to 1984, 

gave competing applicants a quasi-judicial forum in which to 

argue why they should be awarded a license over competitors. 

Critics assert that comparative hearings were time-consuming

and resource intensive, often leading to protracted litigation, and 

lacked transparency.

Assignment Mechanisms

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(2) Lotteries, used principally from 1984 to 1993, allowed FCC to 

randomly select licensees from a pool of qualified applicants. 

Critics contend that lottery winners were not always the best

suited to provide services; thus, several years could pass before 

the licenses were transferred in the private market to entities

capable of deploying a system and effectively using the spectrum. 

FCC’s lottery authority was eliminated by statute in 1997.

2

(3) Auctions, in use since 1993, are a market-based mechanism, 

which grant a license to the applicant that has bid the highest 

price. Critics have suggested that auctions raise consumer prices

for wireless services, slow the deployment of wireless systems,

and are a barrier for small businesses.

Assignment Mechanisms

2See, 47 U.S.C. §309(i)(5)

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Enclosure 

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The Omnibus Budget Reconciliation Act of 1993 authorized FCC to 

award spectrum licenses via competitive bidding (or auctions) for

certain subscriber-based wireless services. Competitive bidding 

authority applied to mutually exclusive applications. 

The act also established policy objectives for FCC’s use of auctions,

including:

• the development and rapid deployment of new technologies, 

products, and services;

• the promotion of economic opportunity and competition and the 

dissemination of licenses among a wide variety of applicants, 

including small businesses;

• the recovery for the public of a portion of the value of the public

spectrum resource; and 

• the efficient and intensive use of spectrum.

Auction Authority

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Since 1994, FCC has conducted 59 auctions, which have generated 

over $14.4 billion for the U.S. Treasury. However, a very small

portion of total licenses has been auctioned; FCC has auctioned 

approximately 56,100 licenses—about 2 percent of total licenses.

3

Auction Results

See attachment II for the assignment mechanism used and current

ownership of licenses for several key industries.

3To calculate the percent of licenses that have been auctioned, we divided the number of auctioned licenses by the number of licenses

included in FCC’s three spectrum license databases.

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Enclosure 

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Two task forces have been established to improve spectrum 

management in the United States.

FCC’s Spectrum Policy Task Force: the task force’s mission is to 

assist the Commission in identifying and evaluating changes in 

spectrum policy that would increase the public benefits derived from

the use of radiofrequency spectrum. 

• In November 2002, the task force released its report to the 

Commission. The report contained a number of 

recommendations to improve spectrum policy by promoting more 

flexible and market-based mechanisms to allocate spectrum.4

• The Commission has implemented several of the task force’s

recommendations, such as developing rules for leasing spectrum. 

Spectrum Task Forces

4The task force report was a product of FCC staff, and not formally adopted by the full Commission.

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The Federal Government Spectrum Task Force, initiated at the 

direction of the President, examined domestic spectrum policy to

promote its development and implementation in a variety of areas,

including national and homeland security, public safety, scientific

research, federal transportation infrastructure, and law enforcement.

• In June 2004, the Department of Commerce released two reports

based on work of the task force. These reports contained a 

number of recommendations for policy reforms to federal 

agencies’ spectrum uses, such as adopting incentives for more

efficient use of spectrum by government agencies.

Spectrum Task Forces

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Enclosure 

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Objective 1:

Spectrum Allocation

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FCC currently employs a largely command-and-control spectrum 

allocation process, although the agency is moving towards more

flexible licenses.

• Under the command-and-control process, FCC defines the 

services that can be provided, the type of equipment that can be

used, and the power levels and geographic boundaries, among 

other things, within frequency bands.

• In recent years, FCC has provided greater operational and 

technical flexibility within some frequency bands, such as in those 

dedicated to broadband personal communications service (PCS)

and wireless communications service (WCS).

Current Allocation Process

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Enclosure 

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FCC’s Spectrum Policy Task Force identified two alternative models for 

managing the spectrum allocation process—the exclusive, flexible rights 

model and the open-access, or commons, model. Both models are marketoriented options for spectrum management.

• Exclusive, flexible rights model provides licensees with exclusive, 

flexible use, and transferable rights within defined geographic areas.

• This is a license-based approach, with characteristics similar to real

estate.

• It extends the existing allocation process by granting greater 

flexibility regarding use of spectrum and permitting the leasing of 

licensed spectrum.

• FCC’s broadband PCS rules closely resemble this model, in that 

they provide substantial flexibility to licensees in terms of technology

and usage.

• Advantages cited by proponents include that this model (1) promotes

economic efficiency, (2) creates certainty for licensees, and (3) 

encourages investment. 

• Disadvantages cited by critics include that it (1) might not encourage 

technical efficiency, (2) could deter innovation, and (3) could 

encourage “hoarding” by license holders. 

FCC Task Force Options for Allocation

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• Open-access model allows an unlimited number of unlicensed

users to share frequencies, with usage rights governed by

technical standards, but with no right to interference protection.

• Open access does not require licensing, similar to today’s

unlicensed spectrum.

• FCC’s Part 15 rules (which govern unlicensed use in the 900 

MHz, 2.4 GHz, and 5.8 GHz bands) closely resemble this

model. Cordless phones and Wi-Fi technologies operate in

these bands.

• Advantages cited by proponents include that this model (1)

promotes technical efficiency, (2) could reduce “hoarding,” and (3) reduces the need for long-term capital investment.

• Disadvantages cited by critics include it (1) could result in 

overuse of spectrum and interference, (2) could lead to

underinvestment, and (3) could lead to service limitations.

FCC Task Force Options for Allocation

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• FCC’s Spectrum Policy Task Force recommended a balanced

approach, focusing primarily on incorporating both the exclusive, 

flexible rights model and the open-access model. Specifically, 

the task force recommended:

• moving away from command-and-control, with limited 

exceptions, such as public safety or to conform to treaty

obligations;

• using the exclusive, flexible rights model primarily where 

scarcity of spectrum is a concern and transaction costs are 

low; and

• using the open-access model where scarcity is a lesser

concern and transaction costs are high.

FCC Task Force Options for Allocation

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Enclosure 

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We found that there is little consensus about the future management 

of the spectrum allocation process.

• There is little agreement about adopting either the exclusive, 

flexible rights model or the open-access model for commercial 

spectrum allocation. 

• Many stakeholders support a mixed approach, with both licensed

and unlicensed spectrum, but little consensus exists about the 

relative amount of spectrum dedicated to licensed and unlicensed

purposes. (See next slide for panelists’ perspectives.)

• There is little agreement about the relative amount of spectrum 

dedicated to commercial and governmental purposes. (See next

slide for panelists’ perspectives.)

Spectrum Allocation Management

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Enclosure 

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Distribution and Use of Spectrum

a no panelists thought more should go to government

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Enclosure 

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Objective 2:

Spectrum Assignment

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FCC was authorized to use auctions to assign spectrum licenses in 1993. This authority was extended and expanded. FCC’s auction authority is set to

expire on September 30, 2007.

Auctions address problems associated with previous methods used to assign

mutually exclusive licenses. Auctions are:

• relatively quick, reducing the average time for granting a license to less 

than a year from the initial application date;

• less costly than previous methods;

• transparent;

• effective in assigning licenses to entities that value them the most; and

• effective in recovering for the public a portion of the value of a national 

resource used for commercial purposes.

Many stakeholders we contacted believe auctions are more efficient than

previous mechanisms. In addition, 11 of 17 panelists reported that auctions 

provide the most efficient method of assigning licenses; no panelists reported 

that comparative hearings or lotteries provided the most efficient method.

Auctions

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In addition, auctions appear to have little or no negative impact on 

end-user prices, investment, and competition; evidence on the impact

on entry and participation of small businesses is less clear.

• End-User Prices: Economic theory suggests that auction 

payments do not impact end-user prices, since these are a sunk

cost; competition ultimately affects end-user prices. In addition, 

using data on cellular prices from 1985 to 1998, one author

empirically found that auctions had no effect on prices. Finally, ten members of our expert panel said that auctions do not impact

end-user prices, while five said that auctions increase prices and 

three said that auctions decrease prices. 

• Investment: Economic theory suggests that auction payments do 

not impact investment, since these are a sunk cost. In addition, 

some stakeholders mentioned that auctions may stimulate 

investment, as companies seek a return on their investment. 

Eight expert panelists said that auctions increase investment, 

while five said that auctions had no effect and seven said that 

auctions decrease investment.

Impact of Auctions

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• Competition: Many stakeholders believe that auctions generally do not place companies at a competitive or financial 

disadvantage compared with companies that acquired licenses

through other means. The reasons cited include: (1) companies

acquired nonauctioned licenses many years ago, (2) many

nonauctioned licenses have subsequently been paid for, and (3)

companies that acquired nonauctioned licenses have

subsequently acquired additional licenses via auction. Eleven 

panelists said that auctions increase the degree of competition,

while three said that auctions had no effect on competition, and

four said that auctions decreased competition.

• Entry and Participation of Small Businesses: A number of

stakeholders told us that auctions hinder the participation of small

businesses because of the financial resources needed to win 

spectrum rights at auction; therefore, auctions limit wireless

markets to large businesses that have extensive financial

resources. However, some stakeholders noted that large 

companies tended to dominate the comparative hearing process

as well. Expert opinion diverged on this issue: eight panelists

said that auctions increase entry while another eight said that 

auctions decrease entry; three panelists said that auctions had no 

effect on entry.

Impact of Auctions

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Secondary markets provide an additional mechanism for entities to 

acquire licenses after the initial assignment.

• Secondary markets incorporate the sale and lease of licenses. In 

some instances, companies acquire licenses through the 

purchase of an entire company (e.g., Cingular’s purchase of 

AT&T Wireless).

• Secondary markets can provide several benefits, including (1) the 

more efficient use of spectrum and (2) the facilitation of new 

technologies and participation of small businesses.

• Potential hindrances to an effective secondary market include the 

lack of flexibility in use of the spectrum.

Secondary Markets

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• Recent FCC rulemakings facilitate secondary-market 

transactions.

• FCC created two mechanisms for spectrum leasing: 

Spectrum Manager Leasing—where the licensee retains

legal and working control of the spectrum—and De Facto

Transfer Leasing—where the licensee retains legal control 

but the lessee assumes working control of the spectrum. 

• FCC authorized leasing for most wireless radio licenses with 

exclusive rights.

• FCC streamlined the leasing approval process, including no 

prior approval for Spectrum Manager Leases and immediate 

approval for De Facto Transfer Leases that do not raise 

potential public interest concerns. 

Secondary Markets

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Objective 3:

Panelists’ and Stakeholders’ Suggestions 

for Improvement

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Panelists, stakeholders, and previous GAO reports identified several concerns

about current spectrum management policy. These concerns include:

• The government-wide structure for spectrum management.

• The process of allocating spectrum.

• The process of assigning spectrum for commercial purposes.

Government-wide structure: The bifurcated responsibility for spectrum

management can hinder efforts at fundamental reform of spectrum

management.

• Neither FCC nor NTIA has ultimate decisionmaking authority over 

spectrum management or the authority to impose fundamental reform.

• The current structure can lead to protracted spectrum decisions.

• Because of the lack of a single decisionmaking point for spectrum

reform, in 2003, GAO recommended the establishment of an

independent commission that would conduct a comprehensive 

examination of current U.S. spectrum management. The commission

would involve all relevant stakeholders, including commercial interests, 

government agencies, regulators, and others, to ensure a diversity of 

views.

Concerns about Spectrum Management

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Allocation: Many panelists and stakeholders believe the spectrum 

allocation process is less effective than it could be. In criticizing the 

current process,

• Panelists most frequently identified the slowness of the allocation

process as one of its weakness (10 panelists).

• Some stakeholders note that the current allocation process leads

to underutilization of the spectrum. For example, a recent report 

noted that during a 4-day period in New York City, only 13 

percent of spectrum between 30MHz and 2.9GHz was occupied

at one time or another.

• Some stakeholders assert that spectrum is not allocated to the 

highest value uses.

• Some entities, including those in public safety and critical 

infrastructure, express concern about the limited amount of 

spectrum allocated for noncommercial use. 

Assignment: Some panelists and stakeholders believe the incentive 

programs for small business are flawed. For example, some 

stakeholders noted that large companies ultimately acquire licenses

initially assigned with small business incentives.

Concerns about Spectrum Management

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Panelists and stakeholders made a variety of suggestions to improve 

spectrum management. The most frequently suggested 

improvements include the following.

• Reexamine the distribution of spectrum to enhance the efficient 

and effective use of spectrum.

• Ensure clearly defined rights and flexibility in licensed spectrum 

bands to promote efficiency.

• Extend and modify FCC’s auction authority.

There was no consensus on these suggested improvements among 

stakeholders and our panelists, except for extending FCC’s auction 

authority.

Suggested Improvements

Page 38 GAO-06-212R FCC Spectrum Allocation and Assignment Process 
Enclosure 

34

Reexamine the distribution of spectrum to enhance the efficient and 

effective use of spectrum.

• To encourage greater utilization of spectrum, systematically

track the level of use of spectrum allocations, perhaps through 

a “spectrum census.”

• Evaluate the relative allocation of spectrum for government 

and commercial use. 

• Evaluate the relative allocation of spectrum for licensed and 

unlicensed purposes. 

• Create a balanced approach to spectrum allocation, 

considering all spectrum users.

Suggested Improvements

Page 39 GAO-06-212R FCC Spectrum Allocation and Assignment Process 
Enclosure 

35

Ensure clearly defined rights and flexibility in licensed spectrum bands

to promote efficiency.

• Clarify and better define spectrum license rights.

• Permit more flexible use in licensed bands, especially in

terms of the types of services offered within licensed bands

and the technology used within bands.

• Allow FCC to continue developing and implementing 

innovative spectrum management practices while ensuring a 

balance between flexibility and interference protection.

Suggested Improvements

Page 40 GAO-06-212R FCC Spectrum Allocation and Assignment Process 
Enclosure 

36

Extend and modify FCC’s auction authority.

• Spectrum auctions should promote the efficient use of

spectrum, not the maximization of revenues for the 

government.

• Panelists and stakeholders overwhelmingly supported an 

extension of the auction authority (21 of 22 panelists). 

• Of those panelists who thought the auction authority should be

extended, some thought there should be some modifications. 

These modifications fall into the following three categories:

• The nature of license rights for auction winners;

• Secondary market changes, including greater involvement 

by FCC; and

• Reexamination of the existing small business incentives.

Suggested Improvements

Page 41 GAO-06-212R FCC Spectrum Allocation and Assignment Process 
Enclosure 

37

The nature of license rights for auction winners.

• Panelists suggested that FCC more clearly define the rights

that are won by license holders. 

• Some panelists preferred more defined property rights, thereby

allowing licensees to use the spectrum in any way they see fit, 

while one panelist simply wanted the nature and scope of the 

rights better defined.

Secondary market changes, including greater involvement by FCC.

• Some panelists said that FCC needed to be more involved in 

the secondary market, either by overseeing transactions to 

ensure transparency or by promoting use of the secondary

market.

• A few panelists also suggested the development of “two-sided”

auctions—in which FCC offers unassigned spectrum and 

existing license holders offer encumbered spectrum.

Suggested Improvements

Page 42 GAO-06-212R FCC Spectrum Allocation and Assignment Process 
Enclosure 

38

Reexamination of the existing small business incentives.

• Some stakeholders and panelists do not support incentive 

programs for small businesses. In their view, (1) the wireless

industry is not a small business industry; (2) while the policy

may have been well intended, the current program is flawed; 

and (3) such incentives create inefficiencies in the market.

• Some stakeholders suggested alternative programs or policies

that would support small and rural business better than the 

current bidding credits mechanism. These suggestions include 

(1) having licenses cover smaller geographic areas, (2) using 

auctions set-aside exclusively for small and rural businesses, and (3) providing better lease options for small and rural 

businesses.

• Still, some stakeholders we spoke with have benefited from the 

bidding credits program and believe that it has been an

effective way of promoting small business participation.

Suggested Improvements

Page 43 GAO-06-212R FCC Spectrum Allocation and Assignment Process 
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39

Summary

Page 44 GAO-06-212R FCC Spectrum Allocation and Assignment Process 
Enclosure 

40

• Spectrum management is a complex process, for which no single 

government agency is responsible.

• While the current spectrum management process is less effective 

than many stakeholders would like, there is little consensus on how 

to improve the process.

• One aspect of spectrum management that appears very effective is

the competitive bidding process for assigning licenses for

commercial entities. Stakeholders overwhelmingly perceive 

auctions as the most effective mechanism for assigning licenses.

• FCC’s auction authority expires on September 30, 2007.

Page 45 GAO-06-212R FCC Spectrum Allocation and Assignment Process 
Enclosure 

41

Participants in GAO / National Academies Expert Panel on

Radiofrequency Spectrum Management

Attachment I

Badri Younes Director, Spectrum Management, Department of Defense

Steve Sharkey Director, Spectrum and Standards Strategy, Motorola, Inc.

Fellow, HP Labs and Adjunct Professor, Massachusetts 

Institute of Technology

David Reed

Executive Director, Spectrum and Public Policy, Verizon

Wireless

Charla Rath

William Moroney President and CEO, United Telecom Council

Mark McHenry President, Shared Spectrum

Ellen Goodman Associate Professor, Rutgers School of Law, Camden

Deputy Chief, Office of Engineering and Technology, Federal 

Communications Commission

Bruce Franca

Gerald Faulhaber Professor, The Wharton School, University of Pennsylvania

David Donovan President, Association for Maximum Service Television, Inc.

Peter Cramton Professor, University of Maryland, College Park

Independent Consultant and Adjunct Professor, University of 

Colorado, Boulder

Dale Hatfield (moderator)

August 9, 2005

Page 46 GAO-06-212R FCC Spectrum Allocation and Assignment Process 
Enclosure 

42

Participants in GAO / National Academies Expert Panel on

Radiofrequency Spectrum Management

Attachment I

Infrastructure Services Manager, Planning &

Engineering, Southern Company Services

Jimmy R. "Rusty" Williams

Senior Director, Trade & Regulatory Affairs, Lockheed

Martin

Jennifer Warren

David Sidall Attorney, Paul, Hastings, Janofsky & Walker, LLP

Intel Senior Fellow, Communications Technology Lab,

Intel Corporation

Kevin Kahn

Dewayne Hendricks CEO, The Dandin Group

Professor of Law and Economics, George Mason

University

Thomas W. Hazlett

Vice President, Government Regulatory Affairs and

Associate General Counsel, PanAmSat

Kalpak Gude

Senior Policy Advisor, Office of the Assistant Secretary,

National Telecommunications and Information

Administration

Joe Gattuso

Vice President, Regulatory Policy, Cellular 

Telecommunications and Internet Association

Diane J. Cornell

Paul Besozzi Attorney, Patton Boggs, LLP

Deputy Director, Stanford Institute for Economic Policy

Research, Stanford University

Gregory Rosston (moderator)

August 10, 2005

Page 47 GAO-06-212R FCC Spectrum Allocation and Assignment Process 
Enclosure 

43

Direct Broadcast Satellite (DBS) Application, auction EchoStar Satellite LLC

XM Radio Inc.

Sirius Satellite Radio, Inc.

Digital Audio Radio Service (DARS) Auction

AM Radio Service Application, auction Clear Channel Broadcasting

FM Radio Service Application, auction Clear Channel Broadcasting

Television Application, auction Gray Television Licensee, Inc.

Specialized Mobile Radio (SMR) Land Application Nextel Communications

Mobile-Commercial and Market Based 

Services

Paging Auction Verizon Wireless Messaging Services

Satellite

Broadcasting

Comparative hearing, Alltel Corporation

lottery, auction

Cellular

Broadband PCS Auction T-Mobile USA, Inc.

Wireless Services

Band or Service Assignment Mechanism Largest License Holder

Assignment and Current Ownership of Licenses in Key Wireless Industries

Attachment II

(544115) 

Page 48 GAO-06-212R FCC Spectrum Allocation and Assignment Process 
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