99–006

107TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 107–443

AUCTION REFORM ACT OF 2002

MAY 7, 2002.—Committed to the Committee of the Whole House on the State of the

Union and ordered to be printed

Mr. TAUZIN, from the Committee on Energy and Commerce,

submitted the following

R E P O R T

[To accompany H.R. 4560]

[Including cost estimate of the Congressional Budget Office]

The Committee on Energy and Commerce, to whom was referred

the bill (H.R. 4560) to eliminate the deadlines for spectrum auctions of spectrum previously allocated to television broadcasting,

having considered the same, report favorably thereon without

amendment and recommend that the bill do pass.

CONTENTS

Page

Purpose and Summary ............................................................................................ 1

Background and Need for Legislation .................................................................... 2

Hearings ................................................................................................................... 4

Committee Consideration ........................................................................................ 4

Committee Votes ...................................................................................................... 5

Committee Oversight Findings ............................................................................... 5

Statement of General Performance Goals and Objectives .................................... 5

New Budget Authority, Entitlement Authority, and Tax Expenditures ............. 5

Committee Cost Estimate ....................................................................................... 5

Congressional Budget Office Estimate ................................................................... 5

Federal Mandates Statement ................................................................................. 7

Advisory Committee Statement .............................................................................. 7

Constitutional Authority Statement ...................................................................... 7

Applicability to Legislative Branch ........................................................................ 7

Section-by-Section Analysis of the Legislation ...................................................... 8

Changes in Existing Law Made by the Bill, as Reported ..................................... 8

PURPOSE AND SUMMARY

The purpose of H.R. 4560, the Auction Reform Act of 2002, is to

eliminate the deadlines for the auctioning of spectrum located in

the 698–806 MHz band (700 MHz band) and the conflict that exists

in statute regarding whether the Federal Communications ComVerDate 11-MAY-2000 04:15 May 09, 2002 Jkt 099006 PO 00000 Frm 00001 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443.XXX pfrm01 PsN: HR443
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mission (the Commission) has the authority to determine when the

auctioning of such spectrum should occur.

H.R. 4560 would prevent the Commission from conducting two

auctions (Auction #31 and Auction #44) of spectrum in the 700

MHz band on June 19, 2002 because conducting these auctions

would greatly undermine sound telecommunications policy and the

proper management of our nation’s electromagnetic spectrum. Television stations that use Channels 52–69 currently occupy the 700

MHz band, and will do so until the digital television transition is

complete. As a result, conducting Auctions #31 and #44 in June

would likely prevent the spectrum from being put to its highest

and best use. In addition, the auctions would occur before the Executive Branch determines whether additional spectrum will be made

available for advanced commercial mobile services, which would

prevent companies interested in providing such services from determining how much they should value spectrum in the 700 MHz

band.

H.R. 4560 has three main components. First, the bill removes the

statutory deadlines for the receipt of revenues derived from the

auctioning of the 700 MHz band. Second, the bill prohibits the

Commission from commencing or conducting Auctions #31 and #44

on June 19, 2002. Third, H.R. 4560 requires the Commission to report to Congress one year after the date of enactment regarding

when the Commission intends to conduct Auctions #31 and #44 as

well as the progress that has been made in the digital television

transition and the assignment and allocation of spectrum for advanced mobile communications services.

BACKGROUND AND NEED FOR LEGISLATION

When Congress enacted the Balanced Budget Act of 1997 (BBA ’97), Congress directed the Commission to auction spectrum in the

700 MHz band for commercial use. Twenty-four MHz of spectrum

in that band was reserved for public safety use, and six MHz was

reserved essentially for buffers between the commercial users and

the public safety users of the band. Thirty MHz was designated for

commercial use in the so-called Upper 700 MHz band (747 MHz– 806 MHz), and forty-eight MHz was designated for commercial use

in the so-called Lower 700 MHz band (698 MHz–746 MHz).

BBA ’97 required the receipts from the auction of the Lower 700

MHz band to be deposited in the Treasury by September 30, 2002.

BBA ’97 also required the auction for the Upper 700 MHz band to

commence after January 1, 2001. The Consolidated Appropriations

Act of 2000 amended the BBA ’97 to require that the proceeds from

the Upper 700 MHz band be deposited by September 30, 2000.

Despite the deadline, the Commission has postponed the auction

of the Upper 700 MHz band five times. In 2000, when the Commission first delayed the auction, the agency recognized that it faced

conflicting statutory requirements. While the Consolidated Appropriations Act contains the deadline for the deposit of receipts for

the Upper 700 MHz auction, section 309(j)(3)(E)(ii) of the Communications Act requires the Commission to include safeguards in

auctions that, among other things, ‘‘ensure that, in scheduling of

any competitive bidding under this subsection, an adequate period

is allowed * * * to ensure that interested parties have a sufficient

time to develop business plans, assess market conditions, and

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evaluate the availability of equipment for the relevant services.’’ The Commission also found that the Communications Act requires

the agency ‘‘to design our auction rules and procedures so as to

manage the radio spectrum effectively and efficiently in the public

interest.’’ (Cellular Telecommunications Industry Association et

al.’s Request for Delay of the Auction of Licenses in the 747–762

and 777–792 MHz Bands Scheduled for September 6, 2000 (Auction

31), Memorandum Opinion, FCC 00–304 at ¶ 6 (rel. September 12,

2000))

The Commission concluded that ‘‘[i]n complying with conflicting

statutes, and resolving those directives as we proceed toward an

auction, we believe the Commission’s primary goal should be to

conduct an auction that is fair, efficient, puts the spectrum to the

best use, and thereby best serves the public interest.’’ (Cellular

Telecommunications Industry Association et al.’s Request for Delay

of the Auction of Licenses in the 747–762 and 777–792 MHz Bands

Scheduled for September 6, 2000 (Auction 31), Memorandum Opinion, FCC 00–304 at ¶ 11 (rel. September 12, 2000)) The Commission also concluded that a delay was appropriate so that bidders

would have an adequate time to develop business plans and assess

market conditions.

As the Commission recognized in 2000, the agency has the authority to delay the auctioning of the 700 MHz band. In Western

Coal Traffic League v. Surface Transportation Board, 216 F. 3d

1168, 1173 (2000), the United States Court of Appeals for the District of Columbia (D.C. Circuit) held that federal agencies are permitted to ignore statutory deadlines ‘‘where doing so is administratively necessary in order to realize the broader goals of the same

statute.’’ The Communications Act’s goal of ensuring ‘‘that interested parties have a sufficient time to develop business plans, assess market conditions, and evaluate the availability of equipment

for the relevant service’’ provides the Commission with the authority to ignore the statutory deadlines for auctioning the 700 MHz

band.

The unique dynamics of the 700 MHz band create the statutory

conflict that exists. With most auctions, the spectrum for which entities bid is either unencumbered at the time of auction or will be

unencumbered by a specific date shortly after the auction is held.

With the 700 MHz band, on the other hand, the spectrum is currently occupied by television stations broadcasting an analog signal

on Channels 52–69. The broadcasters are not required to vacate

the band until December 31, 2006 or when more than 85 percent

of the television households in a particular market have access to

digital television, whichever date is later. Thus, if the 85 percent

threshold is not exceeded in a given market, a television broadcaster would not be required to relinquish its spectrum in the 700

MHz band for conceivably long beyond December 31, 2006. Some

Members of the Committee have expressed the concern that the

transition to digital television has been slow and that many communities will not achieve 85 percent penetration of digital television by the end of 2006 at the current pace. While the Commission and industry groups have recently undertaken several initiatives intended to speed the vacation of the 700 MHz band by the

broadcasters, it is not clear what the impact of these initiatives will

be.

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This situation makes bidding on licenses in the 700 MHz band

very difficult. The spectrum has propagation characteristics that

make it attractive for high-speed mobile data operations. But it

was not clear in 2000, nor is it clearer today, when the broadcasters will vacate the 700 MHz band. That makes it very difficult

to develop a business plan involving spectrum in the band, assess

the market conditions for use of the band, or evaluate when manufacturers would produce equipment for new services in a band for

which there is no clear timetable for the exit of existing licensees.

In addition to concerns about when the band will be available for

mobile data services, it is not clear whether the 700 MHz presents

the optimum band in which to offer such services. Several other

bands have been under consideration by the Commission and the

Administration for allocation and assignment for third-generation

wireless and other advanced mobile services. Some of these other

bands might be better for companies that currently provide secondgeneration wireless services and for international harmonization

purposes. But it is not clear whether these other bands will be

made available, especially the 1755–1850 MHz band, which is currently occupied by Department of Defense and other governmental

spectrum operations.

Until decisions are made regarding the availability of these other

bands, companies cannot determine the extent to which they

should value the spectrum in the 700 MHz band. That band may

be the best spectrum available for advanced mobile services. Several key decisions are not scheduled to be made until the Summer,

however, after the 700 MHz band is currently scheduled to be auctioned.

The Commission currently has the authority to delay Auctions

#31 and #44. The agency is faced with conflicting statutory mandates—one that requires that the auctions occur, and one that requires that the Commission refrain from conducting the auctions at

this time. When faced with such a conflict in statute, the Commission retains the discretion not to conduct the auctions. The Commission should be using this discretion to delay the auctions until

sound telecommunications and spectrum management policy dictate that conducting the auctions is appropriate, and until the requirements of section 309(j)(14)(C)(ii) of the Communications Act

can be satisfied.

Because the Commission intends to conduct the auctions in June,

the Congress must act to remove any ambiguity or conflict in the

law that gives the Commission the impression that it is required

to conduct the auctions then. H.R. 4560 will accomplish that goal

by stripping the deadlines from the relevant statutes.

HEARINGS

The Committee on Energy and Commerce has not held hearings

on the legislation.

COMMITTEE CONSIDERATION

On Thursday, May 2, 2002, the Full Committee met in open

markup session and ordered H.R. 4560 favorably reported to the

House by a voice vote, a quorum being present.

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COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House requires the

Committee to list the recorded votes on the motion to report legislation and amendments thereto. There were no record votes taken

in connection with ordering H.R. 4560 reported. A motion by Mr.

Tauzin to order H.R. 4560 reported to the House was agreed to by

a voice vote.

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House

of Representatives, the Committee has not held oversight or legislative hearings on this legislation.

STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

The goal of H.R. 4560 is to prevent the Commission from conducting Auctions #31 and #44 until the nation’s digital television

transition and spectrum management policy dictate that such auctions should occur.

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the

House of Representatives, the Committee finds that H.R. 4560, the

Auction Reform Act of 2002, would result in no new or increased

budget authority, entitlement authority, or tax expenditures or revenues.

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by

the Director of the Congressional Budget Office pursuant to section

402 of the Congressional Budget Act of 1974.

CONGRESSIONAL BUDGET OFFICE ESTIMATE

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House

of Representatives, the following is the cost estimate provided by

the Congressional Budget Office pursuant to section 402 of the

Congressional Budget Act of 1974:

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, May 2, 2002.

Hon. W.J. ‘‘BILLY’’ TAUZIN,

Chairman, Committee on Energy and Commerce,

House of Representatives, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 4560, the Auction Reform

Act of 2002.

If you wish further details on this estimate, we will be pleased

to provide them. The CBO staff contact is Kathleen Gramp.

Sincerely,

ROBERT A. SUNSHINE

(For Dan L. Crippen, Director).

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Enclosure.

H.R. 4560—Auction Reform Act of 2002

Summary: H.R. 4560 would repeal statutory deadlines for auctioning licenses for the use of some of the electromagnetic spectrum

currently allocated to television channels 52 through 69. The bill

also would direct the Federal Communications Commission (FCC)

to issue a report within one year after enactment on issues related

to rescheduling the auction of those frequencies.

The budgetary effects of the bill would depend on both actions by

the FCC and economic factors. Proceeds could be higher than expected under current law if all of the frequencies are auctioned before the FCC’s auction authority expires in 2007; but they could be

lower or zero if such auctions are not completed by 2007. On balance, CBO estimates that enacting this bill would reduce expected

proceeds from the authority to auction these frequencies. It would

therefore lead to a net loss of receipts and thus an increase in direct spending of $1.4 billion over the 2003–2007 period. Because

the bill would affect direct spending, pay-as-you-go procedures

would apply.

H.R. 4560 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA)

and would impose no costs on state, local, or tribal governments.

Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 4560 is shown in the following table. The costs

of this legislation fall within budget function 950 (undistributed offsetting receipts).

By fiscal year, in millions of dollars—

2002 2003 2004 2005 2006 2007

CHANGES IN DIRECT SPENDING

Channels 52–69 auction receipts:

Under current law:

Estimated budget authority ................................ 0 ¥2,800 ¥600 ¥600 0 0

Estimated outlays ................................................ 0 ¥2,800 ¥600 ¥600 0 0

Proposed changes:

Estimated budget authority ................................ 0 2,800 600 600 ¥1,300 ¥1,300

Estimated outlays ................................................ 0 2,800 600 600 ¥1,300 ¥1,300

Channels 52–69 auction receipts:

Under H.R. 4560:

Estimated budget authority ................................ 0 0 0 0 ¥1,300 ¥1,300

Estimated outlays ................................................ 0 0 0 0 ¥1,300 ¥1,300

Basis of estimate: Under current law, the spectrum currently allocated to television channels 52 through 69 should be available for

new commercial uses after the television stations complete their expected transition from analog to digital broadcasting technology.

CBO expects that, under current law, this transition will occur well

after the statutory goal of December 31, 2006. Companies would

discount the amount they are willing to pay for such licenses because of the lag between an auction and completion of the transition to digital television. We estimate that proceeds from the FCC’s

auction of these bands, which is scheduled to start on June 19,

2002, would total about $4 billion under current law.

CBO expects that repealing statutory deadlines for licensing

these frequencies would affect auction proceeds in two ways. On

the one hand, if all of the affected spectrum were auctioned at a

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later date, we expect that total proceeds would be greater than $4

billion. On the other hand, eliminating the statutory deadline

would increase the likelihood that these bands would not be auctioned before the FCC’s auction authority expires in 2007, particularly because the transition to digital television is likely to occur

well after that point. For this estimate, we assume there is a 50

percent chance that auctions of all of the affected spectrum would

be held by 2007. (If they do occur, proceeds would most likely be

collected after 2005.) Our estimate of proceeds under this bill—a

total of $2.6 billion over the 2003–2012 period—reflects the net effect of these two factors.

Pay-as-you-go considerations: The Balanced Budget and Emergency Deficit Control Act sets up pay-as-you-go procedures for legislation affecting direct spending or receipts. The net changes in

outlays that are subject to pay-as-you-go procedures are shown in

the following table. For the purposes of enforcing pay-as-you-go

procedures, only the effects through fiscal year 2006 are counted.

By fiscal year, in millions of dollars

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Changes in outlays .......... 0 2,800 600 600 ¥1,300 ¥1,300 0 0 0 0 0

Changes in receipts ......... Not applicable

Intergovernmental and private-sector impact: H.R. 4560 contains

on intergovernmental or private-sector mandates as defined in

UMRA and would impose no costs on state, local, or tribal governments.

Estimate prepared by: Federal Costs: Kathleen Gramp; Impact

on state, local, and tribal governments: Angela Seitz; Impact on the

private sector: Jean Talarico.

Estimate approved by: Peter H. Fontaine, Deputy Assistant Director for Budget Analysis.

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office

pursuant to section 423 of the Unfunded Mandates Reform Act.

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the

Federal Advisory Committee Act were created by this legislation.

CONSTITUTIONAL AUTHORITY STATEMENT

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House

of Representatives, the Committee finds that the Constitutional authority for this legislation is provided in Article I, section 8, clause

3, which grants Congress the power to regulate commerce with foreign nations, among the several States, and with the Indian tribes.

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the

terms and conditions of employment or access to public services or

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accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act.

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title

Section 1 establishes the short title of the bill, the Auction Reform Act of 2002.

Section 2. Findings

Section 2 makes certain Congressional findings.

Section 3. Repeal of deadlines for spectrum auctions

Section 3 repeals the statutory deadlines for the deposit of receipts from the auctioning of spectrum in the 700 MHz band.

Section 4. Termination of scheduled auctions

Section 4 prohibits the Commission from commencing or conducting Auctions #31 and #44 on June 19, 2002.

Section 4 requires that the Commission submit a report to Congress one year after the date of enactment that specifies when the

Commission intends to reschedule Auctions #31 and #44 and describes the progress that the Commission has made with respect to

the digital television transition and the assignment and allocation

of additional spectrum for advanced mobile communications services.

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the

House of Representatives, changes in existing law made by the bill,

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic,

existing law in which no change is proposed is shown in roman):

SECTION 309 OF THE COMMUNICATIONS ACT OF 1934

SEC. 309. ACTION UPON APPLICATIONS; FORM OF AND CONDITIONS

ATTACHED TO LICENSES.

(a) * * *

(j) USE OF COMPETITIVE BIDDING.—

(1) * * *

* * * * * * *

(14) AUCTION OF RECAPTURED BROADCAST TELEVISION SPECTRUM.—

(A) * * *

* * * * * * *

(C) SPECTRUM REVERSION AND RESALE.—

(i) * * *

(ii) Licensees for new services occupying spectrum

reclaimed pursuant to clause (i) shall be assigned in

accordance with this subsection. øThe Commission

shall complete the assignment of such licenses, and reVerDate 11-MAY-2000 04:15 May 09, 2002 Jkt 099006 PO 00000 Frm 00008 Fmt 6659 Sfmt 6602 E:\HR\OC\HR443.XXX pfrm01 PsN: HR443
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port to the Congress the total revenues from such competitive bidding, by September 30, 2002.¿

* * * * * * *

SECTION 3007 OF THE BALANCED BUDGET ACT OF 1997

SEC. 3007. DEADLINE FOR COLLECTION.

The Commission shall conduct the competitive bidding required

under this title or the amendments made by this title in a manner

that ensures that all proceeds of such bidding are deposited in accordance with section 309(j)(8) of the Communications Act of 1934

not later than September 30, 2002. This section shall not apply to

the band of frequencies between 698 and 806 megahertz, inclusive.

SECTION 213 OF THE ACT OF NOVEMBER 29, 1999

(H.R. 3425 of the 106th Congress and enacted into law by section 1001(a)(5) of

Public Law 106–113)

SEC. 213. (a) REVISED SCHEDULE FOR COMPETITIVE BIDDING OF

SPECTRUM.—(1) * * *

ø(2) Commencing on the date of the enactment of this Act, the

Federal Communications Commission shall initiate the competitive

bidding process previously required under section 337(b)(2) of the

Communications Act of 1934 (as repealed by the amendment made

by paragraph (1)).

ø(3) The Federal Communications Commission shall conduct the

competitive bidding process described in paragraph (2) in a manner

that ensures that all proceeds of such bidding are deposited in accordance with section 309(j)(8) of the Communications Act of 1934

(47 U.S.C. 309(j)(8)) not later than September 30, 2000.¿

* * * * * * *

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