SPECTRUM 

MANAGEMENT

Preliminary Findings on 

Federal Relocation Costs 

and Auction Revenues

Statement of Mark L. Goldstein, Director 

Physical Infrastructure Issues

Testimony 

Before the Subcommittee on Strategic 

Forces, Committee on Armed Services, 

U.S. Senate

For Release on Delivery 

Expected at 2:30 p.m. EDT

Wednesday, April 24, 2013

GAO-13-563T

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-13-563T, a testimony 

before the Subcommittee on Strategic Forces, 

Committee on Armed Services, U.S. Senate

April 24, 2013

SPECTRUM MANAGEMENT

Preliminary Findings on Federal Relocation Costs 

and Auction Revenues

Why GAO Did This Study

Radio frequency spectrum is the 

resource that makes possible wireless 

communications. Balancing competing 

industry and government demands for 

a limited amount of spectrum is a 

challenging and complex task. In 2006, 

FCC completed an auction of spectrum 

licenses in the 1710-1755 MHz band 

that had previously been allocated for 

federal use. As part of an effort to 

make additional spectrum available for 

commercial use, DOD assessed the 

feasibility of relocating 11 major 

communication systems from the 

1755-1850 MHz band. In September 

2011, DOD found that it would cost 

about $13 billion over 10 years to 

relocate most operations from the 

1755-1850 MHz band. 

GAO was asked to review the costs to 

relocate federal spectrum users and 

revenues from spectrum auctions. This 

testimony addresses our preliminary 

findings on (1) estimated and actual 

relocation costs and revenue from the 

previously auctioned 1710-1755 MHz 

band, (2) the extent to which DOD 

followed best practices to prepare its 

preliminary cost estimate for vacating 

the 1755-1850 MHz band, and (3) 

existing government or industry 

forecasts for revenue from an auction 

of the 1755-1850 MHz band. GAO 

reviewed relevant reports; interviewed 

DOD, FCC, NTIA, and Office of 

Management and Budget officials and 

industry stakeholders; and analyzed 

the extent to which DOD’s preliminary 

cost estimate met best practices 

identified in GAO’s Cost Estimating 

and Assessment Guide (Cost Guide). 

What GAO Found

Actual costs to relocate federal users from the 1710-1755 megahertz (MHz) band

have exceeded the original $1 billion estimate by about $474 million as of March 

2013, although auction revenues appear to exceed relocation costs by over $5 

billion. Actual relocation costs exceed estimated costs for various reasons, 

including unforeseen challenges and some agencies not following the National 

Telecommunications and Information Administration’s (NTIA) guidance for 

preparing the cost estimate. In contrast, the Department of Defense (DOD) 

expects to complete relocation for about $275 million or approximately $80 

million less than its $355 million estimate. According to DOD officials, the 

relocation of systems from this band has been less expensive than originally 

estimated because many systems were simply re-tuned to operate in the 

adjacent 1755-1850 MHz band. The auction of the 1710-1755 MHz band raised 

almost $6.9 billion in gross winning bids. NTIA expects agencies to complete the 

relocation effort between 2013 and 2017; therefore, final net auction revenue 

(auction revenue less relocation costs) may change. 

DOD’s preliminary cost estimate for relocating systems from the 1755-1850 MHz 

band substantially or partially met GAO’s best practices, but changes in key 

assumptions may affect future costs. Adherence with GAO’s Cost Guide helps to 

minimize the risk of cost overruns, missed deadlines, and unmet performance 

targets. GAO found that DOD’s estimate substantially met the comprehensive 

and well-documented best practices. For instance, it included complete 

information about systems’ life cycles and documentation for the majority of 

systems was sufficient. However, not all programs had evidence of costinfluencing ground rules and assumptions, and some of the source data were 

insufficient. GAO also determined that DOD partially met the accurate and 

credible best practices. For example, DOD applied appropriate inflation rates and 

its estimated costs generally agreed with its 2001 cost estimate for this band. 

However, DOD did not develop a confidence level, making it difficult to determine 

if the costs considered are the most likely costs, and DOD only completed some 

sensitivity analyses and risk assessments at the program level for some 

programs. DOD officials said that changes to key assumptions could 

substantially change its costs. Most importantly, decisions about which spectrum 

band DOD would relocate to are still unresolved. Nevertheless, DOD’s cost 

estimate was consistent with its purpose—informing the decision to make 

additional spectrum available for commercial wireless services.

No government revenue forecast has been prepared for a potential auction of

licenses in the 1755-1850 MHz band, and a variety of factors could influence 

auction revenues. One private sector study in 2011 forecasted $19.4 billion in 

auction revenue for licenses in this band, assuming that federal users would be 

cleared and the nationwide spectrum price from a previous auction, adjusted for 

inflation, would apply to this spectrum. The price of spectrum, and ultimately 

auction revenue, is determined by supply and demand. The Federal 

Communications Commission (FCC) and NTIA jointly influence the amount of 

spectrum allocated to federal and nonfederal users (the supply). The potential 

profitability of a spectrum license influences its demand. Several factors would 

influence profitability and demand, including whether the spectrum is cleared of 

federal users or must be shared. 

View GAO-13-563T. For more information, 

contact Mark L. Goldstein at (202) 512-2834 

or goldsteinm@gao.gov.
Page 1 GAO-13-563T 

United States Government Accountability Office

Washington, DC 20548

Chairman Udall, Ranking Member Sessions, and Members of the 

Subcommittee:

Thank you for the opportunity to be here today as the Subcommittee 

examines the Department of Defense’s (DOD) requirements for radio 

frequency spectrum.1 As you know, DOD requires spectrum to support 

military operations, testing, and training at home and around the world. 

For example, DOD has dramatically increased its use of unmanned aerial 

systems in support of overseas missions; these systems require spectrum 

to transmit volumes of critical intelligence, surveillance, and 

reconnaissance data, leading to an increase in DOD’s demand for 

spectrum. Similarly, as the demand for and use of smart phones, tablets, 

and other wireless devices continues to grow, commercial requirements 

for spectrum are expanding as well, with important implications for 

economic growth. Thus, balancing competing industry and government 

demands for a limited amount of spectrum, today and in the future, is a 

challenging and complex task.

In June 2010, the administration issued a presidential memorandum 

directing the National Telecommunications and Information Administration 

(NTIA) to collaborate with the Federal Communications Commission 

(FCC) to make available a total of 500 MHz of federal and nonfederal 

spectrum for wireless broadband within 10 years.2 As part of this effort, 

DOD studied the feasibility of relocating military systems from the 1755-

1850 MHz band,3 which is ideally suited to enabling highly mobile, yet 

reliable communication links for commercial and federal users. Relocating 

to other parts of the radio frequency spectrum means that many of these 

 

1

The radio frequency spectrum is the part of the natural spectrum of electromagnetic 

radiation lying between the frequency limits of 3 kilohertz (kHz) and 300 gigahertz (GHz). 

Radio frequencies are grouped into bands and are measured in units of Hertz, or cycles 

per second. The term kHz refers to thousands of Hertz, megahertz (MHz) to millions of 

Hertz, and GHz to billions of Hertz. The Hertz unit of measurement is used to refer to both 

the quantity of spectrum (such as 500 MHz of spectrum) and the frequency bands (such 

as the 1755-1850 MHz band). 

2

See, Memorandum for the Heads of Executive Departments and Agencies, Unleashing 

the Wireless Broadband Revolution, 75 Fed. Reg. 38387 (June 28, 2010). 

3

Within the United States, this band is allocated exclusively to the federal government, 

particularly for defense purposes, such as military tactical communications, air combat 

training, and space systems. 

 
 

Page 2 GAO-13-563T 

military systems would need to be redesigned. In addition, few other 

comparable spectrum bands are available that can effectively support the 

federal operations currently in the band. In September 2011, DOD 

estimated that the cost to relocate most military systems from the 1755-

1850 MHz band would be about $12.6 billion over 10 years.

My statement today discusses our ongoing review, requested by the 

Senate Committee on Armed Services, of federal agencies’ spectrum 

relocation costs and auction revenues. Our review focuses on (1) the 

differences between estimated and actual federal relocation costs, and 

revenue from the auction of the 1710-1755 MHz band; (2) the extent to 

which DOD followed best practices to prepare its preliminary cost 

estimate for vacating the 1755-1850 MHz band and the limitations, if any, 

of its analysis; and (3) what government or industry revenue forecasts 

exist for an auction of the 1755-1850 MHz band, and what factors, if any, 

could influence the actual auction revenue. To determine the estimated 

and actual federal relocation costs, and revenue from the auction of the 

1710-1755 MHz band, we reviewed annual progress reports for the 1710-

1755 MHz transition published by NTIA and spectrum auction data 

published by FCC as of December 2012.4 We limited our analysis to the 

Advanced Wireless Services-1 (AWS-1) auction involving the 1710-1755 

MHz band; this is the only spectrum auction involving federal agencies, 

including DOD, with significant, known relocation costs.5 To assess 

whether the cost of vacating the 1755-1850 MHz band is sufficiently 

captured in DOD’s preliminary cost estimate, we assessed DOD’s 

preliminary estimate against GAO’s Cost Estimating and Assessment 

Guide (Cost Guide), which has been used to evaluate cost estimates 

 

4

To assess the reliability of the relocation cost and auction revenue data, we reviewed 

documentation related to the data, compared the data to other sources, including 

government reports, and discussed the data with FCC and NTIA officials. We determined 

that the FCC and NTIA data were sufficiently reliable for our purposes.

5

There have been other auctions involving the relocation of federal government agencies. 

For example, the National Oceanic and Atmospheric Administration (NOAA), Air Force, 

and National Science Foundation previously operated systems in the 1670-1675 MHz 

band. The estimated cost to relocate these systems was $35-55 million for NOAA and 

$515,000 for the Air Force. See NTIA, Spectrum Reallocation Final Report: Response to 

Title VI – Omnibus Budget Reconciliation Act of 1993 (Washington, D.C.: February 1995). 

FCC auctioned the band in April 2003, and the auction generated $12.6 million. Final 

relocation costs are unclear. 
 

Page 3 GAO-13-563T 

across the government;6 these best practices help ensure cost estimates 

are comprehensive, well-documented, accurate, and credible. To identify 

any limitations affecting DOD’s estimate, we also interviewed DOD 

officials responsible for developing the department’s preliminary cost 

estimate. To identify any government or industry forecasts of revenue 

from a future auction of the 1755-1850 MHz band and any factors that 

would affect the value of spectrum licenses, we reviewed academic, 

government, and public policy literature. We also interviewed officials 

from the Congressional Budget Office (CBO) and the Office of 

Management and Budget (OMB), and stakeholders with knowledge of 

spectrum licensing issues, including industry and policy experts. We are 

conducting our work in accordance with generally accepted government 

auditing standards. Those standards require that we plan and perform the 

audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives. We 

believe that the evidence obtained provides a reasonable basis for our 

findings and conclusions based on our audit objectives. We plan to issue 

our final report on this work in May 2013.

The radio frequency spectrum is the resource that makes possible 

wireless communications and supports a vast array of government and 

commercial services. DOD uses spectrum to transmit and receive critical 

voice and data communications involving military tactical radio, air 

combat training, precision-guided munitions, unmanned aerial systems, 

and aeronautical telemetry and satellite control, among others. The 

military employs these systems for training, testing, and combat 

operations throughout the world. Commercial entities use spectrum to 

provide a variety of wireless services, including mobile voice and data, 

paging, broadcast television and radio, and satellite services.

In the United States, FCC manages spectrum for nonfederal users under 

the Communications Act,7 while NTIA manages spectrum for federal 

government users and acts for the President with respect to spectrum 

management issues as governed by the National Telecommunications 

 

6

GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and 

Managing Capital Program Costs, GAO-09-3SP (Washington, D.C.: March 2009). 

7

Communications Act, 47 U.S.C. § 309. 

Background 
 

Page 4 GAO-13-563T 

and Information Administration Organization Act.8 FCC and NTIA, with 

direction from Congress and the President, jointly determine the amount 

of spectrum allocated for federal, nonfederal, and shared use. FCC and 

NTIA manage the spectrum through a system of frequency allocation and 

assignment.

• Allocation involves segmenting the radio spectrum into bands of 

frequencies that are designated for use by particular types of radio 

services or classes of users. (Fig. 1 illustrates examples of allocated 

spectrum uses, including DOD systems using the 1755-1850 MHz 

band.) In addition, spectrum managers specify service rules, which 

include the technical and operating characteristics of equipment.

 

8

Pub. L. No. 102-538, title I, 106 Stat. 3533, codified as amended at 47 U.S.C. ch. 8.
 

Page 5 GAO-13-563T 

Figure 1: Examples of Allocated Spectrum Uses and DOD Systems Using the 1755-1850 MHz band

• Assignment, which occurs after spectrum has been allocated for 

particular types of services or classes of users, involves providing 

users, such as commercial entities or government agencies, with a 

license or authorization to use a specific portion of spectrum. FCC 

assigns licenses within frequency bands to commercial enterprises, 

state and local governments, and other entities. Since 1994, FCC has 

used competitive bidding, or auctions, to assign certain licenses to 
 

Page 6 GAO-13-563T 

commercial entities for their use of spectrum.9 Auctions are a marketbased mechanism in which FCC assigns a license to the entity that 

submits the highest bid for specific bands of spectrum. NTIA 

authorizes spectrum use through frequency assignments to federal 

agencies. More than 60 federal agencies and departments combined 

have over 240,000 frequency assignments, although 9 departments, 

including DOD, hold 94 percent of all frequency assignments for 

federal use.

Congress has taken a number of steps to facilitate the deployment of 

innovative, new commercial wireless services to consumers, including 

requiring more federal spectrum to be reallocated for commercial use. 

Relocating communications systems entails costs that are affected by 

many variables related to the systems themselves as well as the 

relocation plans. Some fixed microwave systems, for example, can use 

off-the-shelf commercial technology and may just need to be re-tuned to 

accommodate a change in frequency. However, some systems may 

require significant modification if the characteristics of the new spectrum 

frequencies differ sufficiently from the original spectrum. Specialized 

systems, such as those used for surveillance and law enforcement 

purposes, may not be compatible with commercial technology, and 

therefore agencies have to work with vendors to develop equipment that 

meets mission needs and operational requirements.

In 2004, the Commercial Spectrum Enhancement Act (CSEA) established 

a Spectrum Relocation Fund,10 funded from auction proceeds, to cover 

the costs incurred by federal entities that relocate to new frequency 

assignments or transition to alternative technologies.11 The auction of 

spectrum licenses in the 1710-1755 MHz band was the first with 

relocation costs to take place under CSEA. Twelve agencies previously 

operated communication systems in this band, including DOD. CSEA 

 

9

Not all licenses are assigned via auctions. For example, in some frequency bands, FCC 

authorizes unlicensed use of spectrum—that is, users do not need to obtain a license to 

use spectrum. Rather, an unlimited number of unlicensed users can share frequencies on 

a noninterference basis. Thus, the assignment process does not apply to the use of 

unlicensed spectrum. 

1047 U.S.C. § 928.

11Eligible relocation expenses are those costs incurred by a federal entity to achieve 

comparable capability of systems, regardless of whether that is achieved by relocating to 

a new frequency assignment or utilizing an alternative technology. 47 U.S.C. § 923(g)(3). 
 

Page 7 GAO-13-563T 

designated 1710-1755 MHz as “eligible frequencies” for which federal 

relocation costs could be paid from the Spectrum Relocation Fund.12 In 

September 2006, FCC concluded the auction of licenses in the 1710-

1755 MHz band and, in accordance with CSEA,13 a portion of the auction 

proceeds is currently being used to pay spectrum relocation expenses.14

In response to the President’s 2010 memorandum requiring that 

additional spectrum be made available for commercial use within 10 

years, in January 2011, NTIA selected the 1755-1850 MHz band as the 

priority band for detailed evaluation and required federal agencies to 

evaluate the feasibility of relocating systems to alternative spectrum 

bands. DOD provided NTIA its input in September 2011, and NTIA 

subsequently issued its assessment of the viability for accommodating 

commercial wireless broadband in the band in March 2012.15 Most 

recently, the President’s Council of Advisors on Science and Technology 

published a report in July 2012 recommending specific steps to ensure 

the successful implementation of the President’s 2010 memorandum.16

The report found, for example, that clearing and vacating federal users 

from certain bands was not a sustainable basis for spectrum policy largely 

because of the high cost to relocate federal agencies and disruption to 

the federal missions. It recommended new policies to promote the sharing 

of federal spectrum. The sharing approach has been questioned by 

CTIA—The Wireless Association and its members,17 which argue that 

cleared spectrum and an exclusive-use approach to spectrum 

 

1247 U.S.C. § 923(g)(2).

1347 U.S.C. § 928(d)(1), appropriates from the Spectrum Relocation Fund such sums as 

may be required to pay authorized relocation or sharing costs. See, also 47 U.S.C. § 

928(c). 

14This auction included licenses in the 1710-1755 MHz and 2110-2155 MHz bands. In 

August 2008, FCC held a second auction of the licenses that were not sold in the first 

auction. 

15NTIA, An Assessment of the Viability of Accommodating Wireless Broadband in the 

1755-1850 MHz Band (Washington, D.C.: March 2012). 

16Executive Office of the President, President’s Council of Advisors on Science and 

Technology, Report to the President: Realizing the Full Potential of Government-Held 

Spectrum to Spur Economic Growth (Washington, D.C.: July 2012). 

17CTIA-The Wireless Association is an international nonprofit membership organization 

that has represented the wireless communications industry since 1984. Membership in the 

association includes wireless carriers and their suppliers, as well as providers and 

manufacturers of wireless data services and products. 
 

Page 8 GAO-13-563T 

management has enabled the U.S. wireless industry to invest hundreds of 

billions of dollars to deploy mobile broadband networks resulting in 

economic benefits for consumers and businesses.

Actual costs to relocate communications systems for 12 federal agencies 

from the 1710-1755 MHz band have exceeded original estimates by 

about $474 million, or 47 percent, as of March 2013. The original 

transfers from the Spectrum Relocation Fund to agency accounts, totaling 

over $1 billion, were made in March 2007. Subsequently, some agencies 

requested additional monies from the Spectrum Relocation Fund to cover 

relocation expenses. Agencies requesting the largest amounts of 

subsequent transfers include the Department of Justice ($294 million), the 

Department of Homeland Security ($192 million), the Department of 

Energy ($35 million), and the U.S. Postal Service ($6.6 million). OMB and 

NTIA officials expect the final relocation cost to be about $1.5 billion 

compared with the original estimate of about $1 billion. Total actual costs 

exceed estimated costs for many reasons, including unforeseen 

challenges, unique issues posed by specific equipment location, the 

transition timeframe, costs associated with achieving comparable 

capability, and the fact that some agencies may not have properly 

followed OMB and NTIA guidance to prepare the original cost estimate. 

NTIA reports that it expects agencies to complete the relocation effort 

between 2013 and 2017.

Although 11 of the 12 agencies plan to spend the same amount or more 

than they estimated, DOD expects to complete the 1710-1755 MHz 

transition for about $275 million, or approximately $80 million less than its 

cost estimate. DOD’s cost estimates, some made as early as 1995, 

changed over time as officials considered different relocation scenarios 

with differing key assumptions and their thinking evolved about the 

Some Agencies 

Underestimated 1710-

1755 MHz Band 

Relocation Costs, 

Although Auction 

Revenues Appear to 

Exceed Those Costs

Some Federal Agencies 

Underestimated 

Relocation Costs
 

Page 9 GAO-13-563T 

systems that would be affected, according to DOD and NTIA officials. 

Cost estimates to relocate military systems from the late 1990s and early 

2000s ranged from a low of $38 million to as much as $1.6 billion, 

depending on the scenario. DOD’s final cost estimate to relocate from the 

band was about $355 million. DOD officials told us that the relocation of 

systems from the 1710-1755 MHz band has been less expensive than 

originally estimated because many of its systems were simply re-tuned to 

operate in the 1755-1850 MHz band.

The auction of the 1710-1755 MHz band raised almost $6.9 billion in 

gross winning bids from the sale of licenses to use these frequencies.18

This revenue minus the expected final relocation costs of approximately 

$1.5 billion suggests that the auction of the band will raise roughly $5.4 

billion for the U.S. Treasury. As mentioned above, NTIA reports that it 

expects agencies to complete the relocation effort between 2013 and 

2017; therefore, the final net revenue amount may change. For example, 

the Department of the Navy has already initiated a process to return 

almost $65 million to the Spectrum Relocation Fund.

 

18Although the AWS-1 auction of spectrum licenses raised $13.7 billion, the portion of the 

auction proceeds associated with the transferred government spectrum amounted to 

almost $6.9 billion and was deposited in the Spectrum Relocation Fund. 

Auction Revenues Appear 

to Exceed Agency 

Relocation Costs

DOD’s Preliminary 

Cost Estimate 

Substantially or 

Partially Met GAO’s 

Identified Best 

Practices, but 

Changes in 

Assumptions May 

Affect Future Costs
 

Page 10 GAO-13-563T 

DOD’s Office of Cost Assessment and Program Evaluation (CAPE)19 led 

the effort to prepare the department’s preliminary cost estimate portion of 

its study to determine the feasibility of relocating its 11 major radio 

systems from the 1755-1850 MHz band. To do so, CAPE worked closely 

with cost estimators and others at the respective military services 

regarding the technical and cost data needed to support the estimate and 

how they should be gathered to maintain consistency across the services. 

The services’ cost estimators compiled and reviewed the program data, 

identified the appropriate program content affected by each system’s 

relocation, developed cost estimates under the given constraints and 

assumptions, and internally reviewed the estimates consistent with their 

standard practices before providing them to CAPE. CAPE staff then 

reviewed the services’ estimates for accuracy and consistency, and 

obtained DOD management approval on its practices and findings. 

According to DOD officials, CAPE based this methodology on the cost 

estimation best practices it customarily employs.

We reviewed DOD’s preliminary cost estimation methodology and 

evaluated it against GAO’s Cost Guide, which also identifies cost 

estimating best practices that help ensure cost estimates are 

comprehensive, well-documented, accurate, and credible. These 

characteristics of cost estimates help minimize the risk of cost overruns, 

missed deadlines, and unmet performance targets:

• A comprehensive cost estimate ensures that costs are neither omitted 

nor double counted.

• A well-documented estimate is thoroughly documented, including 

source data and significance, clearly detailed calculations and results, 

and explanations for choosing a particular method or reference.

• An accurate cost estimate is unbiased, not overly conservative or 

overly optimistic, and based on an assessment of most likely costs.

• A credible estimate discusses any limitations of the analysis from 

uncertainty or biases surrounding data or assumptions.

 

19The Director of Cost Assessment and Program Evaluation (CAPE) is a principal staff 

assistant and advisor to the Secretary of Defense and Deputy Secretary of Defense in the 

Office of the Secretary of Defense. 

DOD’s Preliminary Cost 

Estimate for Relocating 

from the 1755-1850 MHz 

Band Substantially or 

Partially Met GAO’s 

Identified Best Practices
 

Page 11 GAO-13-563T 

DOD officials developed the preliminary cost estimate as a less-rigorous, 

“rough-order-of-magnitude” cost estimate20 as outlined by NTIA, not a 

budget-quality cost estimate. Because of this, we performed a high-level 

analysis, applying GAO’s identified best practices to DOD’s cost estimate 

and methodology, and did not review all supporting data and analysis.

Overall, we found that DOD’s cost estimate was consistent with the 

purpose of the feasibility study, which was to inform the decision-making 

process to reallocate 500 MHz of spectrum for commercial wireless 

broadband use. Additionally, we found that DOD’s methodology 

substantially met the comprehensive and well-documented characteristics 

of reliable cost estimates, and partially met the accurate and credible 

characteristics.21

• Comprehensive—Substantially Met: We observed that DOD’s 

estimate included complete information about systems’ life cycles, an 

appropriate level of detail to ensure cost elements were neither 

omitted nor double-counted, and overarching study assumptions that 

applied across programs. However, some programs did not list all the 

discrete tasks required for relocation, and not all the individual 

programs had evidence of cost-influencing ground rules and 

assumptions.

• Well-documented—Substantially Met: We found that management 

reviewed and accepted the estimate, the estimate was consistent with 

the technical baseline data, and documentation for the majority of 

programs was sufficient that an analyst unfamiliar with the program 

could understand and replicate what was done. However, the 

documentation also captured varying levels of detail on source data 

and its reliability, as well as on calculations performed and estimation 

 

20The rough-order-of-magnitude estimate is typically developed to support “what-if” 

analyses, and is helpful in examining differences in high-level variation alternatives to see 

which are most feasible. Because it is developed from limited data and in a short time, it 

should never be considered a budget-quality cost estimate. 

21GAO’s Cost Guide includes five levels of compliance with its best practices. Not Met: 

Provided no evidence that satisfies any of the characteristic. Minimally Met: Provided 

evidence that satisfies a small portion of the characteristic. Partially Met: Provided 

evidence that satisfies about half of the characteristic. Substantially Met: Provided 

evidence that satisfies a large portion of the characteristic. Fully Met: Provided complete 

evidence that satisfies the entire characteristic.
 

Page 12 GAO-13-563T 

methodology used, some of which were not sufficient to support a 

rough-order-of-magnitude estimate.

• Accurate—Partially Met: We found that DOD properly applied 

appropriate inflation rates and made no apparent calculation errors. In 

addition, the estimated costs agreed with DOD’s prior relocation cost 

estimate for this band conducted in 2001.22 However, no confidence 

level was specifically stated in DOD’s cost estimate to determine if the 

costs considered are the most likely costs, which is required to fully or 

substantially meet this characteristic.

• Credible—Partially Met: We observed that DOD cross-checked 

major cost elements and found them to be similar. However, some 

sensitivity analyses and risk assessments were only completed at the 

program level for some programs, and not at all at a summary level.23

Performing risk assessments and sensitivity analyses on all projects 

and at the summary level is required to fully meet this characteristic, 

and is required on a majority of projects and at the summary level to 

substantially meet this characteristic.

Even though DOD’s preliminary cost estimate substantially met some of 

our best practices, as the assumptions supporting the estimate change 

over time, costs may also change. According to DOD officials, any 

change to key assumptions about the bands to which systems would 

move could substantially change relocation costs. Because decisions 

about the time frame for relocation and the spectrum bands to which the 

various systems would be reassigned have not been made yet, DOD 

based its current estimate on the most likely assumptions, provided by 

NTIA, some of which have already been proven inaccurate or are still 

undetermined. For example:

 

22CAPE compared the overall cost estimate using constant fiscal year 2011 dollars with 

DOD’s 2001 cost estimate for relocating from the same band (Department of Defense, 

Investigation of the Feasibility of Accommodating the International Mobile 

Telecommunications (IMT) 2000 Within the 1755-1850 MHz Band (February 9, 2001)), 

adjusting for changes in the types and quantities of the systems, and demonstrated that 

the two estimates are within 5 percent of each other.

23A sensitivity analysis examines how changes to key assumptions and inputs affect the 

estimate. A risk assessment identifies the factors underlying an estimate that might be 

uncertain and the risks they pose to the estimate. 

As the Assumptions 

Supporting DOD’s Cost 

Estimate for Relocating 

from the 1755-1850 MHz 

Band Change, Costs May 

Also Change
 

Page 13 GAO-13-563T 

• Relocation bands: According to DOD officials, equipment relocation 

costs vary depending on the relocation band’s proximity to the current 

band. Moving to bands further away than the assumed relocation 

bands could increase costs; moving to closer bands could decrease 

costs. In addition, congestion, in both the 1755-1850 MHz band and 

the potential bands to which its systems might be moved, complicates 

relocation planning. Also, DOD officials said that many of the potential 

spectrum bands to which DOD’s systems could be relocated would 

not be able to accommodate the new systems unless other actions 

are also taken. For example, the 2025-2110 MHz band, into which 

DOD assumed it could move several systems and operate them on a 

primary basis, is currently allocated to commercial electronic news 

gathering systems and other commercial systems. To accommodate 

military systems within this band, FCC would need to withdraw this 

spectrum from commercial use to allow NTIA to provide DOD primary 

status within this band, or FCC would have to otherwise ensure that 

commercial systems operate on a non-interference basis with military 

systems. FCC has not initiated a rulemaking procedure to begin such 

processes.

• Relocation start date: DOD’s cost estimate assumed relocation 

would begin in fiscal year 2013, but no auction has been approved, so 

relocation efforts have not begun. According to DOD officials, new 

equipment and systems continue to be deployed in and designed for 

the current band, and older systems are retired. This changes the 

overall profile of systems in the band, which can change the costs of 

relocation. For example, a major driver of the cost increase between 

DOD’s 2001 and 2011 relocation estimates for the 1755-1850 MHz 

band was the large increase in the use of unmanned aerial systems. 

DOD deployed these systems very little in 2001, but their numbers 

had increased substantially by 2011. Conversely, equipment near the 

end of its life cycle when the study was completed may be retired or 

replaced outside of relocation efforts, which could decrease relocation 

costs. 

• Inflation: Inflation will drive up costs as more time elapses before the 

auction occurs.

In addition to changing assumptions, the high-level nature of a roughorder-of-magnitude estimate means that it is not as robust as a detailed, 

budget-quality lifecycle estimate, and its results should not be considered 

or used with the same confidence. DOD officials said that for a spectrumband relocation effort, a detailed, budget-quality cost estimate would 

normally be done during the transition planning phase once a spectrum 
 

Page 14 GAO-13-563T 

auction has been approved, and would be based on specific auction and 

relocation decisions.

No official government revenue forecast has been prepared by CBO, 

FCC, NTIA, or OMB for a potential auction of the 1755-1850 MHz band 

licenses, but some estimates might be prepared once there is a greater 

likelihood of an auction. Officials at these agencies knowledgeable about 

estimating revenue from the auction of spectrum licenses said that it is 

too early to produce meaningful forecasts for a potential auction of the 

1755-1850 MHz band. Moreover, CBO only provides written estimates of 

potential receipts when a congressional committee reports legislation 

invoking FCC auctions. OMB officials said NTIA, with OMB concurrence, 

will transmit federal agency relocation cost estimates to assist FCC in 

establishing minimum bids for an auction once it is announced.24 OMB 

would also estimate receipts and relocation costs as part of the 

President’s budget. OMB analysts would use relocation cost information 

from NTIA to complete OMB’s estimate of receipts.

Although no official government revenue forecast exists, an economist 

with the Brattle Group, an economic consulting firm, published a revenue 

forecast in 2011 for a potential auction of the 1755-1850 MHz band that 

 

24FCC calculates minimum bids for spectrum auctions typically based on bandwidth and 

license-area population. Bidders for specific licenses must put forth opening bids that 

match or exceed the minimum bid to be in contention. 

No Government 

Revenue Forecasts 

Exist for a Potential 

Auction of the 1755-

1850 MHz Band, and a 

Variety of Factors 

Could Influence 

Auction Revenues

Federal Agencies Have Not 

Produced a Revenue 

Forecast for the 1755-1850 

MHz Band
 

Page 15 GAO-13-563T 

forecasted revenues of $19.4 billion for the band.25 We did not evaluate 

the accuracy of this revenue estimate. Like all forecasts, the Brattle 

Group study was based on certain assumptions. The study assumed that 

the 1755-1850 MHz band would be generally cleared of federal users. It 

also assumed the AWS-1 average nationwide price of $1.03 per MHz-pop 

as a baseline price for spectrum allocated to wireless broadband 

services,26 and that the 1755-1780 MHz portion of the band would be 

paired with the 2155-2180 MHz band, which various industry 

stakeholders currently support. The study assumed that the 95 MHz of 

spectrum between 1755 and 1850 MHz would be auctioned as part of a 

total of 470 MHz of spectrum included in 6 auctions sequenced 18 

months apart and spread over 9 years with total estimated net receipts of 

$64 billion. In addition, the study adjusted the price of spectrum based on 

the increase in the supply of spectrum over the course of the six 

auctions,27 as well as for differences in the quality of the spectrum bands 

involved.

Like all goods, the price of licensed spectrum, and ultimately the auction 

revenue, is determined by supply and demand. This fundamental 

economic concept helps to explain how the price of licensed spectrum 

could change depending on how much licensed spectrum is available 

now and in the future, and how much licensed spectrum is demanded by 

the wireless industry for broadband applications. Government agencies 

can influence the supply of spectrum available for licensing, whereas 

 

25Coleman Bazelon, The Brattle Group, Inc., Expected Receipts From Proposed Spectrum 

Auctions (Washington, D.C.: July 28, 2011). 

26The unit price of licensed spectrum is typically expressed in terms of dollars per MHzpop, where MHz-pop is the product of total MHz of a band and population covered by the 

region of a license. The $1.03 price represents the current price for AWS-1 spectrum 

based on the original AWS-1 price adjusted for inflation using the SpecEx Spectrum 

Index. 

27To adjust the price of spectrum for the increased supply, the study used the price 

elasticity for spectrum. According to the study, wireless broadband spectrum is generally 

thought to have a price elasticity of around -1.2, which implies that a 1 percent increase in 

the base supply of spectrum should result in a 1.2 percent decrease in its price. 

A Variety of Factors Could 

Influence Auction 

Revenues
 

Page 16 GAO-13-563T 

expectations about profitability determine demand for spectrum in the 

marketplace.28

Supply. In 2010, the President directed NTIA to work with FCC to make 

500 MHz of spectrum available for use by commercial broadband 

services within 10 years. This represents a significant increase in the 

supply of spectrum available for licensing in the marketplace. As with all 

economic goods, the price and value of licensed spectrum are expected 

to fall as additional supply is introduced, all other things being equal.

Demand. The expected, potential profitability of a spectrum license 

influences the level of demand for it. Currently, the demand for licensed 

spectrum is increasing and a primary driver of this increased demand is 

the significant growth in commercial-wireless broadband services, 

including third and fourth generation technologies that are increasingly 

used for smart phones and tablet computers. Some of the factors that 

would influence the demand for licensed spectrum are:

• Clearing versus Sharing: Spectrum is more valuable, and companies 

will pay more to license it, if it is entirely cleared of incumbent federal 

users, giving them sole use of licensed spectrum; spectrum licenses 

are less valuable if access must be shared. Sharing could potentially 

have a big impact on the price of spectrum licenses. In 2012, the 

President’s Council of Advisors on Science and Technology 

advocated that sharing between federal and commercial users 

become the new norm for spectrum management, especially given 

the high cost and lengthy time it takes to relocate federal users.

• Certainty and Timing: Another factor that affects the value of licensed 

spectrum is the certainty about when it becomes available. Any 

increase in the probability that the spectrum would not be cleared on 

time would have a negative effect on the price companies are willing 

to pay to use it. For example, 7 years after the auction of the 1710-

1755 MHz band, federal agencies are still relocating systems. The 

estimated 10-year timeframe to clear federal users from the 1755-

 

28The value of a spectrum license, and hence the future price of licensed spectrum at a 

given auction, depends on many factors, ranging from the physical characteristics of the 

spectrum that is licensed to the general investment climate and the existence of applicable 

technology infrastructure. For the purposes of this discussion, we focus only on those 

supply and demand factors directly influenced by government decisions or wireless 

companies. 
 

Page 17 GAO-13-563T 

1850 MHz band, and potential uncertainty around that timeframe, 

could negatively influence demand for the spectrum.

• Available Wireless Services: Innovation in the wireless broadband 

market is expected to continue to drive demand for wireless services. 

For example, demand continues to increase for smartphones and 

tablets as new services are introduced in the marketplace. These 

devices can connect to the Internet through regular cellular service 

using commercial spectrum, or they can use publicly available

(unlicensed) spectrum via wireless fidelity (Wi-Fi) networks to access 

the Internet.29 The value of the spectrum, therefore, is determined by 

continued strong development of and demand for wireless services 

and these devices, and the profits that can be realized from them.

Chairman Udall, Ranking Member Sessions, and Members of the 

Subcommittee, this concludes my prepared remarks. I am happy to 

respond to any questions that you or other Members of the Subcommittee 

may have at this time.

For questions about this statement, please contact Mark L. Goldstein, 

Director, Physical Infrastructure Issues, at (202) 512-2834 or 

goldsteinm@gao.gov. In addition, contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this statement. Individuals who made key contributions to this 

statement include Mike Clements, Assistant Director; Stephen Brown; 

Jonathan Carver; Jennifer Echard; Emile Ettedgui; Colin Fallon; Bert 

Japikse; Elke Kolodinski; Joshua Ormond; Jay Tallon; and Elizabeth 

Wood.

 

29Wi-Fi networks can permit multiple computing devices in each discrete location to share 

a single wired connection to the Internet, thus efficiently sharing spectrum. 

GAO Contacts and 

Staff 

Acknowledgments 

(543324)
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