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S. HRG. 108–969 

RURAL WIRELESS BROADBAND 

HEARING 

BEFORE THE

COMMITTEE ON COMMERCE, 

SCIENCE, AND TRANSPORTATION 

UNITED STATES SENATE 

ONE HUNDRED EIGHTH CONGRESS 

FIRST SESSION 

MAY 22, 2003 

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

( 

(II) 

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION 

ONE HUNDRED EIGHTH CONGRESS 

FIRST SESSION 

JOHN MCCAIN, Arizona, Chairman 

TED STEVENS, Alaska 

CONRAD BURNS, Montana 

TRENT LOTT, Mississippi 

KAY BAILEY HUTCHISON, Texas 

OLYMPIA J. SNOWE, Maine 

SAM BROWNBACK, Kansas 

GORDON H. SMITH, Oregon 

PETER G. FITZGERALD, Illinois 

JOHN ENSIGN, Nevada 

GEORGE ALLEN, Virginia 

JOHN E. SUNUNU, New Hampshire 

ERNEST F. HOLLINGS, South Carolina, 

Ranking 

DANIEL K. INOUYE, Hawaii 

JOHN D. ROCKEFELLER IV, West Virginia 

JOHN F. KERRY, Massachusetts 

JOHN B. BREAUX, Louisiana 

BYRON L. DORGAN, North Dakota 

RON WYDEN, Oregon 

BARBARA BOXER, California 

BILL NELSON, Florida 

MARIA CANTWELL, Washington 

FRANK R. LAUTENBERG, New Jersey 

JEANNE BUMPUS, Republican Staff Director and General Counsel 

ROBERT W. CHAMBERLIN, Republican Chief Counsel 

KEVIN D. KAYES, Democratic Staff Director and Chief Counsel 

GREGG ELIAS, Democratic General Counsel 

SUBCOMMITTEE ON COMMUNICATIONS 

CONRAD BURNS, Montana, Chairman 

TED STEVENS, Alaska 

TRENT LOTT, Mississippi 

KAY BAILEY HUTCHISON, Texas 

OLYMPIA J. SNOWE, Maine 

SAM BROWNBACK, Kansas 

GORDON H. SMITH, Oregon 

PETER G. FITZGERALD, Illinois 

JOHN ENSIGN, Nevada 

GEORGE ALLEN, Virginia 

JOHN E. SUNUNU, New Hampshire 

ERNEST F. HOLLINGS, South Carolina, 

Ranking 

DANIEL K. INOUYE, Hawaii 

JOHN D. ROCKEFELLER IV, West Virginia 

JOHN F. KERRY, Massachusetts 

JOHN B. BREAUX, Louisiana 

BYRON L. DORGAN, North Dakota 

RON WYDEN, Oregon 

BARBARA BOXER, California 

BILL NELSON, Florida 

MARIA CANTWELL, Washington 

(III) 

C O N T E N T S 

Page 

Hearing held on May 22, 2003 ............................................................................... 1 

Statement of Senator Burns ................................................................................... 1 

Statement of Senator Stevens ................................................................................ 11 

Statement of Senator Sununu ................................................................................ 3 

WITNESSES

Bush, Antoinette Cook, Executive Vice President, Northpoint Technology, 

Ltd. ........................................................................................................................ 5 

Prepared statement .......................................................................................... 8 

Hazlett, Thomas W., Senior Fellow, Manhattan Institute for Policy Research . 20 

Prepared statement .......................................................................................... 22 

Kirkpatrick, Harold, President and Chief Executive Officer, MDS America, 

Inc. ......................................................................................................................... 16 

Prepared statement .......................................................................................... 17 

Landrieu, Hon. Mary L., U.S. Senator from Louisiana ........................................ 4 

Roadman, Larry S., President, Margaretville Telephone Company, Inc. and 

Manager, Wireless Access LLC ........................................................................... 23 

Prepared statement .......................................................................................... 24 

Wright, Andrew S., President, Satellite Broadcasting and Communications 

Association of America ......................................................................................... 12 

Prepared statement .......................................................................................... 13 

APPENDIX

Inouye, Hon. Daniel K., U.S. Senator from Hawaii, prepared statement ........... 39 

Lott, Hon. Trent, U.S. Senator from Mississippi, prepared statement ............... 39 

(1) 

RURAL WIRELESS BROADBAND 

THURSDAY, MAY 22, 2003 

U.S. SENATE, SUBCOMMITTEE ON COMMUNICATIONS, COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:44 p.m. in room 

SD–562, Dirksen Senate Office Building, Hon. Conrad Burns, 

Chairman of the Subcommittee presiding. 

OPENING STATEMENT OF HON. CONRAD BURNS, 

U.S. SENATOR FROM MONTANA 

Senator BURNS. We will call the Subcommittee on Communications to order now and thank everybody for coming today and in 

particular the two principals in this issue and this is our first hearing. 

The topic of today’s hearing is the economic future of our nation, 

I believe, how speed of deployment in the wireless high-speed 

Internet access for rural America. The recent history of telecommunications aptly illustrates the demand and usefulness of 

wireless telecommunications access and the widespread wireless 

Internet access to rural America will be an even more beneficial 

service. 

Today’s hearing will focus specifically on the Landrieu-Sununu 

bill. How did you get your name first? 

Senator LANDRIEU. Well, we had a long conversation about it. It 

was easy. 

Senator BURNS. Did she threaten you? 

Senator LANDRIEU. He was a good partner to work with. 

Senator SUNUNU. It was not a long conversation. She said, ‘‘It is 

my bill.’’ And I said, ‘‘I am happy to help you with it.’’ 

[Laughter.] 

Senator BURNS. There was a time, you know, way back when 

Senator Conrad of North Dakota came across the floor and asked 

me to co-sponsor an amendment on the farm bill we were discussing. And I said, I would certainly support that. He says, good, 

we will call it the Conrad-Burns amendment. I said fine. He got 

halfway across the floor and came back and said, that ain’t going 

to work. 

[Laughter.] 

Senator BURNS. So that is good, though. 

We will focus on that bill today, the Emergency Communications 

Competition Act, and I enthusiastically support it as an innovative 

approach to providing both competitive and multi-channel video 

2 

and wireless broadband services to rural America. I also note that 

the bill has already gained the support of 16 co-sponsors, including 

several on the Commerce Committee. 

Today’s hearing will also address the implementation of the Digital Data Services Act, which I authored and which passed into law 

during the final days of the 106th Congress. The Digital Data Services bill created a pilot project which allowed certain low-powered 

television stations the flexibility to use their spectrum for wireless 

two-way high-speed Internet service. 

This bill builds upon previous legislation that I authored, which 

was the Local TV Act, also, to help ensure that all local television 

stations, just not those with the largest markets, are available to 

consumers. As a former broadcaster, I know Montana has some of 

the smallest in the Nation. Of the 210 television markets, we rank 

from 169th down to 210. We have got the smallest one in our state 

and that is Glendive, Montana, over on the eastern plains. 

Slowly, DBS operators are carrying more local television stations, 

but I am not crossing my fingers that they will ever get to Glendive 

any time soon. There are about a thousand other local television 

stations that serve larger markets and they are based on simple economics which could and should be carried first. 

There is one reason why we need this legislation. It will enable 

the rapid deployment of the new Multi-Channel Video Programming and Data Distribution Service, MVDDS. This wireless service 

is ideal for rural areas because it can be deployed anywhere. I commend the FCC for authorizing this new service. It not only promises to bring local channels to all markets regardless of size, but 

it will also provide broadband Internet access to rural Americans 

who have no such access today; and I expect the low cost of this 

wireless technology will translate into lower costs for consumers. 

This is precisely the kind of innovative new technology we should 

encourage and promote. The injection of this new competition that 

this service will provide for broadband itself should lower the 

prices. We witnessed a dramatic reduction in rates when we got 

several cellular and PCS competitors into the marketplace. We 

need to promote policies that will bring about the same aggressive 

competition for broadband, particularly in rural areas. We must be 

on guard, however, to make sure that the new market entrants are 

not saddled with the costs that others have not borne. 

That brings me to the next point. I am concerned that unless we 

pass this legislation we may never see the deployment of this new 

service. The FCC has determined that the licenses for this new 

service should be auctioned. I have long felt strongly that allowing 

short-term budgetary dictates to dominate spectrum policy often results in disastrous public policy judgments, which ultimately shortchange both the treasury and the consumers. 

I have made it very clear that I want to examine how the auction 

system is working overall. The public interest is best served when 

the spectrum is licensed promptly to applicants that are ready to 

deploy the service, not to the highest bidders that are ill-prepared 

to do so. While auctions make sense in many instances, this is not 

always the case. 

Three years ago, Congress passed the ORBIT Act, legislation 

that I authored which in part exempted from auction spectrum 

3 

used for the provision of international or global satellite communication services. The legislation which we are examining today is 

narrowly confined to how the FCC is going to issue licenses for a 

specific frequency band, the 12.2 to 12.7 gigahertz band. 

In the 12 gigahertz band we are confronted with a case of first 

impression in which the FCC has determined to issue licenses to 

both terrestrial and satellite applicants that share the same spectrum. Previously this was thought to be technologically impossible. 

In my judgment, the same Federal resource must be licenses and 

the same manner for all applicants regardless of the technology 

which they will employ. To do otherwise is to pick industry winners 

and losers. The wireless buildout bill before us today corrects that 

problem. 

I think it is also something that we should always take note of 

whenever we start making policy here with regard to spectrum or 

anything else in the telecommunications industry. Number one, we 

must do no harm; and number two, we must make it technologyneutral, and that allows new ideas, new services, new things, to 

progress. 

I now recognize my good friend from New Hampshire, Senator 

Sununu. 

STATEMENT OF HON. JOHN SUNUNU, 

U.S. SENATOR FROM NEW HAMPSHIRE 

Senator SUNUNU. Thank you very much, Mr. Chairman. I appreciate you convening this hearing and very much appreciate your remarks, especially with regard to the importance of maintaining an 

equitable approach with regard to the way we treat spectrum and 

the use of spectrum and the licensing of spectrum and of course 

maintaining a balanced approach and a fair-minded approach in 

the application of technology and being careful not to bias our markets or our regulatory system toward one technology or another. 

This is an important issue and I believe a very worthwhile piece 

of legislation. It is a piece of legislation in which we see the intersection of a number of new technologies and new ideas for terrestrial DBS. We also see a technology that can meet a very important 

need, a need that is out there, that we hear about every day as 

members of the U.S. Senate, a need of rural access to broadband, 

rural access to broadcast services. 

Finally, this obviously deals with the issue of utilization of spectrum, using spectrum in a way that is in the public interest, in a 

way that will make a difference, and using spectrum in a way that 

maximizes the efficiency in the process. 

I think that the bill accomplishes those things, but I look forward 

to hearing issues, concerns that might be raised regarding its implementation. If there are ways that we can improve and strengthen the legislation, I am of an open mind and I think other members 

of the Subcommittee are as well. 

Thank you again for this hearing and I look forward to the testimony of the witnesses. 

Senator BURNS. Thank you, Senator Sununu, and we thank you 

for your leadership on this, on this particular issue. 

Now we welcome to the Committee, Senator Landrieu of Louisiana, and we thank you for coming today. 

4 

STATEMENT OF HON. MARY L. LANDRIEU, 

U.S. SENATOR FROM LOUISIANA 

Senator LANDRIEU. Thank you, Mr. Chairman. First of all, thank 

you for calling this hearing on this very important matter and for 

your comments and your support of the general direction in which 

the legislation that I have authored, sponsored with Senator 

Sununu, is moving forward. He is an excellent partner and we, our 

states, although in different parts geographically of the Nation, 

share some similar characteristics—the rural nature of some parts 

of our state as well as Montana. We can speak to this issue representing areas that are having trouble not just with price and access, and this legislation that 16 Senators have co-sponsored and 

that is the subject of this hearing today seeks to remedy. 

I would like to submit my full testimony, Mr. Chairman, to the 

record and also submit an excellent article in the Tech section of 

the Post this morning, the summary of which is ‘‘Why Is 

Broadband’s Spread Slowing?’’ It is because access is limited and 

price is not competitive. The legislation that we sponsor is something that will correct both of those points. 

Senator BURNS. Without objection, all of that will be made part 

of the record. 

Senator LANDRIEU. Thank you. 

In addition, Louisiana has a fairly large rural population and relative to our overall population it is much higher than the national 

average, which is 21 percent. Ours is 32, which is one of the reasons that I am before you today. 

In addition, cable rates are up 9.1 percent compared to the overall inflation rate of 2.5. There have been many, many studies on 

this issue. One that I just want to cite for the record is a GAO recent report that cable systems face competition. Most do not, but 

when they do, rates are lower by 17 percent. 

The new technology that we are asking just to be placed on a 

level playing field, not given any added advantage, would provide 

competition everywhere, saving consumers billions and reaching 

the rural areas of this nation, who are also entitled to accurate 

local information as well as emergency information along with our 

urban areas. 

There are 210 local markets. There is no local television in 134 

of those markets, no local TV in eight states. The Chairman is 

aware that one of those states is Montana. The other ones are 

Alaska, Maine, and North Dakota. Rural areas, as I said, are also 

ill served by the current broadband situation because they either 

cannot get it or they cannot afford it. 

This new technology that our bill hopes to again promote would 

improve emergency communication. It would disseminate Federal, 

State, and local emergency alert system warnings to all subscribers. Also, of course, with the recent Federal legislation, on 

amber alerts it would be available to not just urban communities 

but to all communities in the Nation. 

The most important thing, regardless of your views on auctions— 

and I am actually sympathetic and feel, as you do, Mr. Chairman, 

and as you do, Senator Sununu, about the disadvantages of auctions. But whether you are on one side or the other of that argument, no one can be against a level playing field for everyone. This 

5 

legislation that I am putting forward would provide, or that we are 

putting forward, would provide a level playing field to all those 

that can offer this type of service. So again, it is about competition, 

it is about lowering price, it is about consumers, it is about rural 

areas, and either we require all applicants for particular spectrum 

to go to auction or none of them. But this situation where we have 

some going through auction and others not and then having the 

rural areas and the consumers pick up the tab for that seemingly 

bifurcated policy is not I think what we should be doing. 

So I thank you for your co-sponsorship. There is a tremendous 

amount of interest, Mr. Chairman, in this issue and I think this 

hearing is quite timely, and I thank you all. Whatever the bill is 

called, as long as it passes that is what the most important thing 

is. So thank you all very much. 

Senator BURNS. Thank you, Senator Landrieu. I have no questions for the Senator. 

You may join us up here if you like and we will start listening 

to the witnesses that have been invited to testify today. 

Senator LANDRIEU. Thank you, and I will stay for a few minutes 

and then have to get back to another meeting. But if there are any 

questions or comments? 

Senator SUNUNU. Thank you very much. 

Senator LANDRIEU. Thank you. 

Senator BURNS. You are welcome to do so. 

Now we call the panel. We have a panel, only one panel of five 

people: Ms. Antoinette Bush, Executive Vice President, Northpoint, 

here in Washington; Mr. Andrew Wright, who is President, Satellite Broadcasting Communications Association of America; Mr. 

Harold Kirkpatrick, President and CEO of MDS America; Mr. 

Thomas Hazlett, Senior Fellow, Manhattan Institute of Policy Research; and Mr. Larry Roadman, President, Margaretville Telephone Company, from Margaretville, New York. 

We will call on—it is nice to see you back again. 

Ms. BUSH. Thank you. 

Senator BURNS. We will call on Ms. Bush for your testimony 

now, please. 

STATEMENT OF ANTOINETTE COOK BUSH, EXECUTIVE VICE 

PRESIDENT, NORTHPOINT TECHNOLOGY, LTD. 

Ms. BUSH. Thank you, Mr. Chairman, for inviting me to testify 

before you today. It is a pleasure to be back before the Committee, 

albeit in a different seat. 

Senator BURNS. How does it feel down there, by the way? 

Ms. BUSH. It was more fun up there. I want to applaud you for 

holding this hearing. Wireless technologies are ideally suited to address the challenge of serving lightly populated, but geographically 

large areas with advanced communications services. 

Northpoint has a patented technology that makes it possible for 

satellite and terrestrial users to share the same spectrum without 

causing interference. Northpoint has six patents issued and others 

pending. Northpoint intends to offer consumers multi-channel video 

programming, including all local channels, at the rate of approximately $20 per month and a broadband package also for $20 a 

month. We aim to be a national provider and are committed to proVerDate Nov 24 2008 11:49 Nov 15, 2013 Jkt 075679 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 S:\GPO\DOCS\85549.TXT JACKIE
6 

viding the same quality of service in all markets throughout the 

United States. 

Too many rural Americans cannot get the same level of service 

that is offered in urban and suburban communities. Many cannot 

get access to a cable system and DBS is woefully deficient in carriage of local television stations and emergency alerts. Consumers 

in rural areas need services and choices which terrestrial wireless 

can provide. 

With cable rates soaring at three times inflation and with 

broadband unavailable or too expensive for most families, why are 

consumers still waiting for this technology? The FCC licensing 

process is broken. For decades the U.S. licensing system was based 

on the limitations of analog systems and the assumption that satellites and terrestrial systems cannot share spectrum. 

Since 1994 Northpoint has spent millions of dollars proving that 

our technology can co-exist with incumbent satellite services and 

seeking licensing rules that treat terrestrial applicants in the same 

manner as satellite competitors. Last month the FCC rejected the 

last challenge from the DBS industry on the technical rules. 

Let me state for the record that Northpoint does not oppose spectrum auctions in general. When spectrum is available—when available spectrum will not accommodate multiple qualified applicants, 

auctions can be an efficient means to allocate licenses. In the case 

of MVDDS, Northpoint and seven other satellite applicants filed 

applications on the same day for the same spectrum. The FCC subsequently concluded that all eight of us could share the same spectrum. Thus there is no mutual exclusivity or no basis for an auction under the Communications Act. 

Why, then, is there an auction? The FCC has different rules for 

processing satellite versus terrestrial applicants. Satellite applications are called for during a rulemaking process and the applicants 

are then afforded the opportunity to work out the sharing to figure 

out if they can share the spectrum. For terrestrial applications, the 

applications are called for after the rulemaking is completed and 

typically the rulemaking concludes that there should be an auction 

for the licenses and the applicants are not then afforded an opportunity to see if they can share the spectrum. 

Then, a year after our applications were filed, Congress enacted 

the ORBIT Act, which exempts from auction spectrum used for the 

provision of international satellite services. Congress could not 

have realized that the FCC would interpret this provision as prohibiting an auction of the pending satellite applications, but requiring an auction for the pending terrestrial application in the same 

proceeding. 

The competitive disadvantage to terrestrial applicants is obvious. 

They will be subjected to costs not borne by their satellite competitors. The regulatory status quo favors one technology over another. 

We are thankful that Senator Landrieu and Senator Sununu introduced legislation to end this inequality. We thank all of the 

members of the Committee who have co-sponsored this measure. 

A constant refrain we hear from our opponents is that 

Northpoint ought to pay for spectrum. The issue, however, is that 

the rules changed in the middle of the game. Our competitors were 

exempted from auction after our applications were filed. The satVerDate Nov 24 2008 11:49 Nov 15, 2013 Jkt 075679 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 S:\GPO\DOCS\85549.TXT JACKIE
7 

ellite applicants with whom we applied on the same day to share 

the same spectrum include Hughes, DIRECTV’s parent, Boeing, 

Alcatel. These multibillion dollar companies have a huge competitive advantage over terrestrial applicants now that they are getting 

their spectrum without auction. The ultimate result is that terrestrial wireless customers will have to pay more for service than the 

customers of these satellite companies. 

Hughes in fact has never participated in a spectrum auction. 

This year, EchoStar teamed up with a Gibraltar company that has 

access to a U.S. DBS slot to provide DBS service in the United 

States through that Gibraltar license without an auction. Another 

company teamed up with a Canadian company that has a satellite 

slot that serves the United States. Again, they were given permission to provide service in the United States without an auction. 

And in 2001 the FCC awarded nationwide auction-free licenses in 

what is called the DBS expansion band to 11 companies, including 

Hughes and Pegasus, who will be our direct competitors in the 

service we want to provide in the multi-channel video marketplace 

and Internet marketplace. 

I do not fault the satellite companies for getting their licenses 

without an auction. I simply take grave exception to their efforts 

to deprive us of getting the same treatment. We do not seek to be 

licensed on terms more favorable. We seek merely to be licensed on 

the same terms as our satellite competitors. 

Many people do not know that cable systems also have tens of 

thousands of licenses, none of which were purchased at an auction. 

Again, I am not faulting the cable industry, just noting a fact. We 

are expected to be a price competitor with cable, but they are getting their spectrum from the U.S. Government on more favorable 

terms than we would be afforded. 

In closing, I want to make two observations. First, in a striking 

contrast to the MVDDS auction, this year the FCC expressly rejected calls to auction spectrum for terrestrial use in the mobile 

satellite spectrum. 

Second, I think it may be useful to contrast our regulatory efforts 

to those of the Wi-Fi industry, a flourishing technology that burst 

on the scene in the last couple of years. It is estimated that WiFi revenues will reach over $5 billion by the year 2007. Wi-Fi’s success is evidence of what happens when government regulation is 

not a barrier to entry or to innovation. 

If we are privileged to be licensed, I can assure you that we will 

deploy our service across the United States, including Alaska and 

Hawaii, within 2 years. We are not opposed to the licensing of 

other MVDDS operators. Any company that can demonstrate that 

its technology will not cause harmful interference to DBS as required by the law should be eligible for a license. This legislation 

that we are supporting only requires that that license cannot be 

awarded by auction. 

S. 564 will ensure that all terrestrial and satellite operators will 

be licensed in a like manner. Implementation of this principle will 

jump-start the successful deployment of MVDDS, enabling consumers, urban, suburban, and rural, to receive the benefits of an 

innovative new service and lower prices. 

8 

Thank you again for letting me testify. I am happy to answer any 

questions you might have. 

[The prepared statement of Ms. Bush follows:] 

PREPARED STATEMENT OF ANTOINETTE COOK BUSH, EXECUTIVE VICE PRESIDENT, 

NORTHPOINT TECHNOLOGY, LTD. 

Thank you, Mr. Chairman, for inviting me to testify before you today. I also want 

to thank all members of the Committee for giving Northpoint the opportunity to appear in support of S. 564, the Emergency Communications and Competition Act. 

I. The Northpoint Technology Is Uniquely Suited To Serving Rural Areas 

First, I want to applaud you for holding this hearing to highlight how wireless 

technologies can address the needs of rural populations. Indeed, wireless technologies are ideally suited to address the challenge of serving lightly populated, but 

geographically large, areas with advanced communications services. 

In 1994, Northpoint’s founders invented a wireless technology that makes it possible for satellite and terrestrial users to share the same spectrum, at the same 

time, in the same place. In essence, Northpoint found a way to reuse spectrum that 

was previously assigned to satellite users on a non-interfering basis. Although much 

attention has been focused on Northpoint’s business plan to provide video and data 

services in competition with both DBS and cable in the 12.2–12.7 GHz band, this 

technology can be used in almost any spectrum band currently allocated to satellite 

use. Northpoint has six patents issued and others pending. 

In the DBS band, Northpoint proposes to provide multiple channels of video programming and high-speed broadband service to consumers at low prices: $20 per 

month for the video package (including all local channels) and $20 for the 

broadband package. Our locally-deployed systems will have ample capacity to carry 

all local television channels and other local community programming and provide 

a robust broadband service. We aim to be a national provider and are committed 

to provide the same quality of service in all markets, regardless of size. 

Too many rural Americans cannot get the same level of service that is offered in 

urban and suburban communities. Many rural Americans cannot access a cable system, and while DBS does an excellent job of closing the gaps to reach remote households, satellites are woefully deficient in carriage of local television stations and 

broadband. In fact, today there are over 1,000 local television stations that are not 

carried by either EchoStar or DIRECTV. DBS does not provide any local channels 

in 134 markets and no channels in eight entire states. In addition, consumers 

watching DBS will not get Emergency Alert System warnings in most markets. In 

contrast, MVDDS will carry these time-sensitive warnings everywhere. 

This Committee is also well versed in the limited broadband service that is available to rural America. There is a clear need for new broadband providers in rural 

areas, and Northpoint’s wireless broadband technology is well suited to provide a 

cost effective solution. Our technology is low cost and easy to deploy. The consumer 

equipment is also low cost and readily available in the market today. Like Wi-Fi, 

Northpoint provides a technology-based solution to address consumers’ needs. 

In all markets, there is a clear need for additional competition in the multichannel video programming distribution and broadband markets. The FCC and the 

Justice Department have recently documented the absence of competition in the 

multichannel video industry. Even with two DBS operators and one cable operator, 

consumers are still paying very high prices for service. With cable rates soaring at 

a pace three times greater than the rate of inflation, and with broadband access unavailable or too expensive for most families, why are consumers still waiting for the 

opportunity to use Northpoint’s revolutionary technology? 

II. The FCC’s Licensing System Unfairly Discriminates Against Terrestrial 

Systems 

The FCC licensing process is broken. For decades the U.S. licensing practice was 

based on the limitations of analog systems and on the erroneous assumption that 

satellite and terrestrial technologies cannot share the same spectrum. In the past 

decade, Northpoint has spent millions of dollars proving that our technology can coexist with incumbent and planned satellite services. We also have sought licensing 

rules that treat terrestrial applicants like us in the same manner as our satellite 

competitors. 

At first, we were stuck in a Catch-22: we had to conduct tests to prove that our 

technology didn’t cause harmful interference to satellites, but the satellite companies strenuously opposed our requests to carry out those tests on the ground that 

9 

the technology was unproven and the tests were bound to cause interference. We 

finally received the necessary experimental license in 1997 to test in Kingsville, TX. 

We conducted two more tests in 1998 and 1999, in Austin, TX and Washington, D.C. 

There has never been a single DBS customer that has come forward to complain 

of interference. 

In 1998, a subsidiary of the French company Alcatel filed an application seeking 

a license to operate a non-geostationary satellite orbit (NGSO) system in the DBS 

band. The FCC also called for other satellite applications but not terrestrial applications. Northpoint recognized that terrestrial operations would be foreclosed if it did 

not step up and file an application along with the seven satellite applicants in early 

1999. 

A year later, while the eight applications were pending, Congress enacted the 

ORBIT Act, a provision of which exempts from auction ‘‘spectrum used for the provision of international or global satellite communications services.’’ Congress could not 

have realized at the time that the FCC would interpret this provision as prohibiting 

an auction of the NGSO applications but requiring an auction for terrestrial applicants. 

In late 2000, based chiefly on Northpoint’s extensive experimental record, the 

FCC determined to create a new Multichannel Video Distribution and Data Service, 

or MVDDS, that would share the 12.2 12.7 GHz band with satellite operators. 

That same year, at the request of the DBS industry, Congress included a provision in the LOCAL TV Act that directed the FCC to retain an independent firm to 

conduct an independent test of the terrestrial technology proposed by any applicant 

that wanted to share spectrum with DBS satellites. We actually supported the enactment of that law, because it provided that the testing would be done promptly 

and we were fully confident in our technology. 

Northpoint was the only company to submit equipment for that statutorily mandated test in early 2001. The MITRE Corporation, which conducted the test, concluded that satellite-terrestrial spectrum sharing is indeed feasible. Subsequently, 

the FCC adopted technical rules based on the Northpoint technology, citing the 

MITRE testing. 

On April 29, 2003, the FCC reaffirmed its prior decisions that MVDDS and DBS 

can share the same spectrum. The eight year effort to prove our technology to the 

FCC has succeeded. 

The licensing process is still not complete, however. 

Let me note for the record that Northpoint does not oppose spectrum auctions in 

general. In ordinary circumstances, where you have more applicants than spectrum 

available, auctions can be a legitimate and efficient means to distribute spectrum 

licenses. 

But auctions in the context of this proceeding are not appropriate. 

First, Section 309(j) of the Communications Act requires auctions only in those 

cases where ‘‘the Commission accepts mutually exclusive applications.’’ 

In the FCC proceeding involving the Northpoint and NGSO systems, Northpoint 

and seven other satellite applicants filed applications on the same day for the same 

spectrum. The FCC subsequently concluded that all eight can share that spectrum 

with each other and with the two incumbent DBS operators. As a preliminary matter, there is no mutual exclusivity and thus no basis for an auction under the statute. 

Some would wonder, why then is there an auction? Well the key words in the 

statute are ‘‘accept for filing’’. The FCC never accepted the Northpoint applications, 

but it did accept the seven satellite applications. Why the difference in treatment? 

The FCC has different rules for processing satellite versus terrestrial applications. 

Satellite applications are called for during the rulemaking process, thereby giving 

the applicants an opportunity to resolve mutual exclusivity. Terrestrial applications 

are called for after the rulemaking and the terrestrial applicants are not afforded 

the same opportunity. 

This institutional difference in treatment had never caused any particular problem before, because until Northpoint came along, satellite and terrestrial operators 

were never attempting to use the same spectrum resource at the same time. 

Now, however, the competitive disadvantage this causes terrestrial applicants is 

obvious. Terrestrial companies will be subjected to costs not borne by their satellite 

competitors. The regulatory status quo favors one technology over another. Consumers should be the ones who determine the technology that best serves their 

needs, not government. We are thankful that Senators Landrieu and Sununu introduced legislation to end this blatant inequality. And we thank all the members of 

the Committee who have cosponsored this measure. 

10 

III. Northpoint Is Not Seeking Special Treatment; It Is Seeking A Level 

Regulatory Playing Field For All Terrestrial Applicants 

A constant refrain we hear from our opponents is that Northpoint ought to be 

willing to pay for the spectrum. The issue is that the rules changed in the middle 

of the game: our competitors were exempted from an auction after the applications 

were filed. 

I’ve already mentioned the satellite applicants with whom we applied on the same 

day for the same spectrum, and who will be getting their licenses without an auction. These companies include Hughes (DIRECTV’s parent), Boeing, Alcatel and others. These multi-billion dollar companies were given a huge competitive advantage 

that was not afforded terrestrial applicants. The ultimate result is it will cost consumers more for our service if we are forced into an auction. 

Indeed, Hughes has never participated in a spectrum auction. This year EchoStar 

teamed up with a foreign satellite company that has a full-CONUS slot, to get even 

more auction-free spectrum capacity to serve its U.S. subscribers. And Canadian 

satellites have now been authorized to serve the U.S. market, also without auction. 

In 2001, the FCC awarded nationwide auction-free licenses in the DBS Expansion 

Band to eleven companies, including Hughes and Pegasus. They will be our direct 

competitors. 

I do not mention these facts in an effort to fault the satellite companies for getting 

the licenses in the manner they did. But I do take grave exception to their efforts 

to deprive us from getting the same treatment. We do not seek to be licensed on 

terms more favorable than satellite companies; we seek merely to be licensed on the 

same terms. 

The FCC’s Flexibility Order allows mobile satellite system operators to use their 

satellite licenses to operate an ancillary terrestrial system. The FCC expressly rejected calls to conduct an auction for the terrestrial use of this satellite spectrum. 

This presents a striking contrast to the MVDDS auction. 

Some might note that there is a DBS auction scheduled for August of this year. 

We do not believe that the auction can legally go forward, given that the FCC concluded several years ago that DBS is an international satellite service, and thus 

should come within the ORBIT Act prohibition on auctions of orbital locations or 

spectrum used for the provision of international or global satellite services. Moreover, the particular DBS slots that are up for auction are, with one exception, the 

‘‘rejects’’ of the incumbent DBS operators and they are all ‘‘wing’’ slots which are 

incapable of serving the entire continental United States. 

Finally, I would note that the cable industry has received tens of thousands of 

licenses from the FCC, including numerous licenses granted this very year, none of 

which were purchased in auction. Again, I am not faulting the cable industry, just 

noting a fact: It costs the cable industry less to do business with the Federal Government than it would cost us. Yet we are expected to be a price competitor with 

cable. 

In closing, I think it may be useful to contrast our regulatory efforts to those of 

the Wi-Fi industry. Here is a technology that burst onto the scene in just the last 

couple of years, and it is by all accounts flourishing. Recent reports estimate that 

by 2007, Wi-Fi in the U.S. and Europe will generate revenue of $5.5 billion. Policymakers often cite Wi-Fi’s success as evidence of what happens when government 

regulation is no barrier to entry or innovation. Wi-Fi users do not pay the government for the spectrum they use, nor do they face regulatory delays. 

Terrestrial MVDDS should play on a level playing field with satellite competitors 

who utilize the very same spectrum. S. 564 achieves that goal while at the same 

time ensuring that all consumers, rural and urban, will have access to local television stations, emergency information, public interest programming, and broadband 

service. 

If we’re privileged to be licensed, I can assure you that we will deploy MVDDS 

across the entire United States, including Alaska and Hawaii, within two years. 

Moreover, our service will be affordable. 

We are not opposed to the licensing of other MVDDS operators who can share the 

spectrum with us. Any company that can demonstrate its own technology through 

independent testing, pursuant to the LOCAL TV Act and S. 564, should be eligible 

for an MVDDS license. 

S. 564 will ensure that all terrestrial and satellite operators will be licensed in 

a like manner. Implementation of this principle will jumpstart the successful deployment of MVDDS, enabling consumers—urban, suburban and rural—to receive the 

benefits of an innovative new service and lower prices! 

Thank you again for allowing me to testify. I would be pleased to answer any 

questions you might have. 

11 

Senator BURNS. Thank you. 

We have been joined by Senator Stevens of Alaska and we have 

just taken the first testimony from the first witness, Senator Stevens. Have you got an opening statement and then we will continue on? 

STATEMENT OF HON. TED STEVENS, 

U.S. SENATOR FROM ALASKA 

Senator STEVENS. Thank you, Mr. Chairman. I have a statement. 

I cannot stay because of other commitments, but I am pleased to 

see this bill here today. 

I do not know if anyone else has reminded the Committee of the 

history. I know that Northpoint has sought a license from the FCC 

since 1994. In 1999, at my request, there was a provision in the 

Rural Local Broadcasting Signal Act to require the FCC to act on 

Northpoint’s license application by November 29, 2000. As the time 

came for that deadline to be fulfilled, to arrive at that deadline, I 

met with the FCC chairman at that time, Mr. Kennard. He told me 

he would act on the licenses as required. Instead, he started a new 

proceeding to determine whether there should be an auction. 

Later we worked on legislation that required there be a test to 

determine if Northpoint would cause interference with existing satellite companies. It was determined that there would be no interference, but still there would be an auction. 

I understand you have before you a bill, Mr. Chairman, to do 

what we thought we were going to do in 1999 and I encourage you 

to get the bill out of committee as soon as possible. 

Thank you very much. 


522BUSH1.eps
12 

Senator BURNS. OK, Senator Stevens. Next is Andrew Wright, 

President, Satellite Broadcasting and Communications Association 

of America. Thank you for coming, Mr. Wright. 

STATEMENT OF ANDREW S. WRIGHT, PRESIDENT, SATELLITE 

BROADCASTING AND COMMUNICATIONS ASSOCIATION OF 

AMERICA 

Mr. WRIGHT. Thank you, Mr. Chairman. Thank you, Senator 

Burns and Senator Stevens, for inviting me to testify today. SBCA 

is the national trade association that represents the satellite services industry. Our members include satellite television, radio, and 

broadband providers, programmers, equipment manufacturers, distributors, and retailers. 

Satellite television has its roots in rural America. We are extremely proud that we are the only multi-channel video provider 

that provides choice and competition to all Americans. Direct 

broadcast satellite operators DIRECTV and EchoStar provide the 

most advanced television choices in the multi-channel video market, including high definition television, interactive, and other advanced services, to all Americans without discriminating between 

rural and urban areas. 

When Congress passed the Satellite Home Viewer Improvement 

Act of 1999, DBS hoped to be able to rebroadcast local channels to 

consumers in 20 markets. With considerable investment in technological improvements, today DBS subscribers in over 70 markets 

can receive local channels covering over 75 percent of U.S. television households, and both providers are working hard to expand 

that number. By the end of this year, each DBS operator will bring 

local service to over 100 markets, reaching over 85 percent of 

Americans. 

In addition, satellite providers have invested hundreds of millions of dollars to be the only provider offering one- and two-way 

high-speed Internet service to virtually every home and business 

nationwide. Today subscribers of the two providers of satellite 

broadband, DirectWay and StarBand, expense data rates that are 

up to 10 times faster than dial-up Internet service, and new entrants Spaceway and WildBlue are preparing to launch the next 

generation of satellite broadband services. This next generation 

service will offer data rates comparable with cable modem and DSL 

service and at a competitive price. 

However, Mr. Chairman, satellite operators cannot offer subscribers a competitive alternative to wireline technology if the satellite signals that currently provide service to consumers are subjected to interference. Specifically, the ability of DBS to offer its 20 

million households, over 53 million individual viewers, competitive 

alternatives would be greatly diminished if satellite signals are 

subjected to interference from a television wireless cable service operating in the spectrum that was allocated to DBS. 

Sharing would cause ruinous interference to millions of our current and future customers. As Members of Congress, you should be 

concerned by proposals that would jeopardize the benefits of increased competition that your constituents now enjoy. 

In an effort to protect current and future DBS subscribers, SBCA 

and the DBS providers have appealed a recent decision by the FCC 

13 

to the Federal Circuit Court in hopes of reversing the Commission’s 

spectrum-sharing decision. We expect our appeal will be heard this 

fall. However, our greatest concern in this matter is protecting 

DBS consumers from harmful interference. 

However, we feel strongly that, should the FCC’s spectrum-sharing decision ultimately be upheld, Northpoint should not be granted its request for a free nationwide exclusive license. Northpoint is 

asking Congress to require the commission to bypass the normal 

statutorily mandated auction process and to prefer Northpoint to 

its wireless, broadband, and DBS competitors with a gift of publicly 

owned spectrum. There is no legal or public policy justification to 

prefer Northpoint to its competitors. Indeed, the Bush administration has issued a statement of administration policy opposing the 

Northpoint spectrum grab. 

This bill would not level the playing field. Other wireless cable 

systems functionally identical to the one proposed by Northpoint 

have invested over $1.6 billion at auction for their licenses. The 

DBS industry has also purchased spectrum licenses at auction and 

in the aftermarket, spending over $734 million, and another DBS 

auction is scheduled for August. Moreover, DBS service providers 

have invested over $7 billion to bring DBS service to all Americans. 

In closing, DBS is offering consumers across America, including 

rural and underserved areas, a competitive option for television, including high definition video and other advanced services. The next 

generation of high-speed Internet via satellite is just around the 

corner. The future looks bright. To threaten the technical integrity 

and picture quality of this proven service with guaranteed interference would harm all consumers. 

We look forward to working with you and your staff as you continue to create communications policy that benefits all Americans, 

particularly those in rural areas who otherwise have few options 

for the services that DBS offers. Thank you. 

[The prepared statement of Mr. Wright follows:] 

PREPARED STATEMENT OF ANDREW S. WRIGHT, PRESIDENT, SATELLITE

BROADCASTING AND COMMUNICATIONS ASSOCIATION

Thank you, Mr. Chairman, Senator Hollings, and members of the Subcommittee, 

for inviting me to testify today. My name is Andy Wright, and I am the President 

of the Satellite Broadcasting and Communications Association. SBCA is the national 

trade association that represents the satellite services industry. Our members include satellite television, radio and broadband providers, programmers, equipment 

manufacturers, distributors and retailers. 

The direct broadcast satellite (or DBS) operators SBCA represents provide the 

most advanced television choices in the multichannel video market, including highdefinition television and other advanced services. The benefit of satellite-delivered 

technology like DBS is that it can reach consumers across the country without discriminating between rural and urban, sparsely or densely populated areas. 

When Congress passed the Satellite Home Viewer Improvement Act in 1999, 

granting DBS providers the ability to offer local channels, DBS operators DIRECTV 

and EchoStar hoped to be able to offer local channels to consumers in 20 markets. 

However, with technological improvements and increased broadcast center capabilities, today, DBS subscribers in over 70 markets can receive local channels, covering 

over 75 percent of U.S. television households. Further, both providers are working 

hard to expand the number of markets they can serve with local-into-local. By the 

end of this year, each DBS operator has said that they will bring local service to 

100 markets or more. Recent consumer research shows that more than 85 percent 

of new DBS subscribers are purchasing packages that include their local channels 

if they are located in a market where local-into-local is available. 

14 

In addition to providing satellite television service to 20 million American households, satellite providers also offer one-and two-way high-speed Internet service to 

homes and businesses nationwide. Today, subscribers of the two providers of satellite broadband, DIRECWAY and StarBand, experience data rates that are up to 

ten times as fast as dial-up Internet service. 

New entrants SPACEWAY and WildBlue are preparing to launch the next generation of satellite broadband service. This next-generation service should be especially 

appealing to the millions of homes and small offices that lack access to wireline 

broadband alternatives. The data rates for these new services will be comparable 

to cable modem or digital subscriber line (DSL) service. A ‘‘digital divide’’ will no 

longer exist in the market for high-speed Internet service because satellites reach 

across the country with a national footprint. Via satellite, millions of rural consumers that may never be served by wireline technology will have the opportunity 

to access the Internet at the fast data rates available to urban and suburban customers from cable and DSL. 

However, satellite operators can not offer subscribers a competitive alternative to 

wireline technology if the satellite signals that currently provide service to consumers, businesses and the government are subjected to noise from other services 

that operate in or adjacent to the spectrum bands where DBS, satellite radio, and 

satellite broadband operate. Specifically, the ability of DBS to offer subscribers a 

competitive alternative to wireline technology would be greatly diminished if the 

satellite signals which carry DBS services to the American public are subjected to 

interference from a terrestrial wireless service operating in the spectrum that was 

allocated for DBS’s primary use. 

There are now over 20 million DBS subscriber households—comprising some 53 

million individual viewers—which means that one in five television households 

across America receive their multichannel video service via satellite. The issue of 

permitting a terrestrial wireless cable service—as Northpoint Technology, Inc. and 

others propose—to operate in the spectrum band set aside for DBS is of concern to 

the DBS industry because of the threat of ruinous interference that would be caused 

to our current and future customers. 

As Members of Congress, you should be extremely concerned by any proposal that 

would jeopardize the benefits of increased competition that your constituents now 

enjoy. Competitive rates, better customer service, and the quick deployment of advanced telecommunications offerings are the result of the tireless efforts of Congress 

and the Federal Communications Commission (FCC) to create public policy that 

spurs competition in the multichannel video program distribution (MVPD) market. 

Last May, the FCC released an Order authorizing the terrestrial use of the DBS 

spectrum. Unfortunately, it allows for this new service, called Multichannel Video 

Distribution and Data Service (MVDDS), to increase a DBS customer’s signal unavailability by 30 percent or more. As FCC Commissioner Kevin Martin questioned, 

in his dissent to the Order, ‘‘does ‘in the range of 30 percent or higher’ mean 60– 

90 percent? . . . Unfortunately, these questions seem to lead to only one conclusion: 

the majority’s technical requirements are driven by a desire for MVDDS deployment, regardless of cost to DBS licensees and their customers.’’ 

Commissioner Martin also shares our concern of protecting current and future 

DBS consumers from harmful interference. He states, ‘‘By law, DBS service is entitled to protection from ‘harmful interference.’ Even more important, existing DBS 

customers deserve to be protected from unreasonable interference. This [Order] does 

neither.’’ 

It is important to note that the increased interference that will result from 

Northpoint’s proposed service operating in the DBS band is in addition to the 10 

percent increase in unavailability that the DBS industry was forced to accept from 

another satellite service (Non-geostationary satellite orbit, fixed satellite service, or 

NGSO–FSS). A third ubiquitous consumer service should not be shoehorned into 

this spectrum band at the cost of harming the competition in the multichannel video 

marketplace that Congress and the Commission have worked for over a decade to 

foster. 

In an effort to protect current and future DBS subscribers, SBCA and the DBS 

providers have asked the U.S. Court of Appeals for the District of Columbia Circuit 

to reverse the Commission’s spectrum-sharing decision. We expect our appeal to be 

heard this fall. 

We do not fear further competition. In fact, the DBS providers, DIRECTV and 

EchoStar, asked the FCC to place Northpoint’s proposed service in an adjacent spectrum band, which has the same propagation characteristics and the same amount 

of spectrum available, but is not used to provide a ubiquitous consumer service to 

20 million households and more than 53 million Americans. 

15 

We do, however, fear the devastating interference that will occur if this contamination of the DBS downlink by terrestrial services is ultimately permitted. Indeed, 

our fears have been confirmed by a Congressionally-mandated independent study, 

performed by the MITRE Corporation. Specifically, the very first finding of the 

MITRE Report is that the terrestrial sharing of the 12.2–12.7 GHz spectrum band, 

‘‘poses a significant interference threat to DBS operation in many realistic operational situations.’’ 

While our greatest concern with this matter is protecting DBS customers from 

harmful interference, we feel strongly that should the FCC’s spectrum-sharing decision ultimately be upheld, Northpoint should not be granted its request for a free, 

nationwide exclusive license. Northpoint filed suit in Federal court as well, opposing 

the Commission’s decision to assign MVDDS licenses via competitive bidding. 

Northpoint has also appealed to Congress to require the Commission to bypass the 

normal statutorily-mandated auction process and prefer Northpoint to its wireless 

cable and DBS competitors with a gift of publicly-owned spectrum. There is no legal 

or public policy justification to grant that request. Indeed, the Bush Administration 

opposes Northpoint’s spectrum grab and has issued a Statement of Administration 

Policy, stating, ‘‘The Administration would strongly oppose any amendment that 

would restrict the FCC’s ability to assign, via competitive bidding, spectrum licenses 

that could be used by terrestrial (i.e., non-satellite) services. Such a provision would 

interfere with the efficient allocation of Federal spectrum licenses, provide a windfall to certain users, and reduce Federal revenues.’’ 

Further, there are other service operators that have expressed a desire to provide 

MVDDS in the 12.2–12.7 GHz band. In filings to the FCC, both MDS America and 

Pegasus Broadband Corporation have opposed Northpoint’s spectrum grab, and 

urged the Commission to allow for more than one competitor in the MVDDS market. 

Even though we remain opposed to any terrestrial users operating in the DBS spectrum band due to the resulting interference to which our subscribers would be subjected, it would be anti-competitive to grant an exclusive nationwide license to one 

MVDDS operator for free. 

The FCC rejected Northpoint’s requests for a free, nationwide exclusive license, 

and ruled that MVDDS licenses will be assigned via its normal competitive bidding 

procedures. In May 2002, the FCC correctly ruled on this issue by stating, ‘‘Assigning MVDDS licenses through competitive bidding also promotes efficient and intensive use of the spectrum and recovery for the public of a portion of the value of this 

scarce resource.’’ The auction for MVDDS licenses was recently postponed, but only 

until the Commission resolves the question of which geographic divisions to use to 

assign MVDDS licenses. 

In arguing that the Commission should grant it free terrestrial use of the DBS 

spectrum, Northpoint continues its effort to misrepresent the plain meaning of the 

Open-market Reorganization for the Betterment of International Telecommunications Act (‘‘ORBIT Act’’). The ORBIT Act states that, ‘‘the Commission should not 

have the authority to assign by competitive bidding orbital locations or spectrum 

used for the provision of international or global satellite communications services.’’ 

The ORBIT Act does not exempt domestic satellite services, such as DBS, from the 

normal auction process. In fact, the FCC has scheduled an auction for this August 

to assign the remaining DBS frequencies. The ORBIT Act most certainly does not 

exempt a non-satellite provided domestic point-to-multipoint terrestrial wireless 

cable service, as Northpoint proposes to provide, from participating in the normal 

competitive bidding procedure. 

Other wireless cable systems, functionally-identical to the one proposed by 

Northpoint, have invested over $1.6 billion at auction for their licenses, and the 

DBS industry has paid $734 million to purchase spectrum at auction and in the 

aftermarket. Moreover, DBS service providers have invested over $7 billion to bring 

DBS service to over 53 million viewers across America. This investment includes the 

acquisition of spectrum, as well as money spent to build, insure, launch and operate 

DBS satellites, ground systems, uplink facilities and call centers. DBS operators 

made their investments in reasonable reliance upon the Commission’s Orders that 

facilitated an interference-free environment in which to operate their systems. 

In closing, DBS is currently offering consumers across America, including rural 

and underserved areas, a competitive option for video television, including high-definition video and other advanced services. The future looks bright. To threaten the 

technical integrity and picture quality of this proven service with guaranteed interference would harm rural consumers. We look forward to working with you and your 

staff as you continue to create communications policy that benefits all Americans, 

particularly those in rural areas who otherwise have few options for the services 

DBS offers. 

Thank you. 

16 

Senator BURNS. Thank you. 

Now we have Mr. Harold Kirkpatrick, President and CEO of 

MDS America. Thank you for coming today. 

STATEMENT OF HAROLD KIRKPATRICK, PRESIDENT AND 

CHIEF EXECUTIVE OFFICER, MDS AMERICA, INC. 

Mr. KIRKPATRICK. Thank you, Senator. Chairman Burns, Senator 

Sununu, good afternoon and thank you very much for this opportunity to testify on behalf of MDS America. My name is Harold 

Kirkpatrick and I am the President, Chief Executive Officer, and 

the founder of MDS America, and I wish to personally thank you 

and your outstanding staff for inviting MDS America to be a witness at this very important hearing. We hope you will benefit from 

our point of view. 

I have submitted more detailed written testimony to the Committee for its consideration. In my allotted time, I would like to 

briefly introduce you to MDS America and explain why we support 

allowing the FCC to swiftly proceed with auctions for the MVDDS 

spectrum. 

We do not support this proposed legislation and we believe it is 

not the best means of delivering broadband services throughout the 

United States, particularly to rural and underserved areas. In fact, 

Chairman Burns, I am from the backwoods of north Georgia and 

I understand rural areas as well as anybody. 

Senator BURNS. That is above the gnat line, though. 

[Laughter.] 

Mr. KIRKPATRICK. Who we are. MDS America is a startup company based in Stuart, Florida, and founded in the year 2000. We 

are the exclusive North American licensee of MDS International, 

the leading designer of terrestrial broadband transmission systems 

in the DBS band. I formed MDS America in 2000 after working in 

the information technology industry for 15 years and working with 

MDS International deploying these systems for 5 years. 

What we do. Since 1994, MDS International has actually deployed terrestrial broadband systems like the ones described in S. 

564 in numerous locations overseas, providing video programming 

and high-speed Internet services to many delighted subscribers. I 

have helped design and install some of these systems and seen 

them work in some of the most challenging environments known 

to man, including that of Greenland, arguably the most rural area 

in the world. 

This technology works, customers love it, and we are ready to deploy these systems in the U.S. today. MDS systems have delivered 

Internet data wirelessly to individual computers at speeds exceeding 12 megabits per second, faster than any cable modem or DSL. 

As the exclusive U.S. licensee of this technology, MDS has the 

legal right, the technical ability, and the financial backing to bring 

wireless broadband services to market in the U.S. just as fast as 

the FCC can issue these licenses. In fact, MDS International has 

just deployed the largest system of this type in the world, with a 

channel capacity of over 500 digital channels, in the United Arab 

Emirates. 

Why we oppose this legislation. If S. 564 were to become law, 

MDS America and other hopeful MVDDS providers could be deVerDate Nov 24 2008 11:49 Nov 15, 2013 Jkt 075679 PO 00000 Frm 00020 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\85549.TXT JACKIE
17 

layed or denied the opportunity to provide wireless broadband service in the U.S. because the radio spectrum at issue in this bill 

would be given away for free to one company or to an arbitrarily 

limited number of potential operators. 

To my knowledge, Northpoint Technology has never built or deployed a commercial broadband system anywhere in the world. But 

even if that were not the case, the winners under this legislation 

would be chosen only after further contentious regulatory scrutiny 

and inevitably the losers in this skirmish would seek relief in the 

courts, resulting in even further delays in deploying these critical 

services. 

Why we support the FCC’s licensure plan. As you may know, the 

MVDDS radio channels were scheduled to be auctioned by the FCC 

commencing on June 25, 2003, but that auction was postponed due 

to the FCC’s consideration of two changes to its licensing rules. We 

understand that the FCC intends to reschedule these auctions for 

later this summer and we are ready to participate in them, as are 

other companies who have come to us seeking technology. 

These auctions will create a financial incentive to build out this 

spectrum. Gifts of spectrum, however, do not provide this incentive. 

To paraphrase Winston Churchill, spectrum auctions may be the 

worst form of radio licensing known to man, except for all the others. As Dr. Hazlett and others have observed, if there is truly a 

level regulatory playing field with transparent auction rules and 

reasonable construction obligations, this radio spectrum will go to 

those parties who are prepared to make a financial commitment to 

delivering wireless broadband services throughout the U.S. This is 

surely our hope and aspiration. 

In closing, we at MDS America urge you to support the FCC’s 

decision to auction this valuable spectrum under the FCC’s normal 

spectrum auction procedures as soon as possible. 

I would like to thank you once again for the opportunity to testify here today in this hearing on behalf of MDS America. If there 

are any questions from the Committee, I would be delighted to answer them to the best of my abilities. 

[The prepared statement of Mr. Kirkpatrick follows:] 

PREPARED STATEMENT OF HAROLD KIRKPATRICK, PRESIDENT AND CHIEF EXECUTIVE

OFFICER, MDS AMERICA, INC. 

Chairman Burns, Senator Hollings, and distinguished Members of the Subcommittee: Good afternoon and thank you for this opportunity to testify on behalf 

of MDS America. 

My name is Kirk Kirkpatrick and I am the President and Chief Executive Officer 

of MDS America. I wish to personally thank you both, as well as your outstanding 

staff, for your collective willingness to include MDS America as a witness at this 

very important hearing. We hope you will benefit from our point of view in this proceeding. 

We at MDS America fully support the FCC’s plan to auction the Multi-channel 

Video Data and Distribution Service (‘‘MVDDS’’) spectrum that is the subject of this 

hearing today. We believe that going forward with an auction will fulfill the public 

policy objectives that Congress meant to accomplish when adopting auctions as the 

FCC’s primary spectrum licensing mechanism: an auction of the MVDDS spectrum 

will ensure that this spectrum is promptly licensed to the parties who value it most 

highly, with the added benefit of bringing millions of dollars into the U.S. Treasury. 

More importantly, competition among MVDDS providers will result from an auction; 

that competition will ensure that facilities will be built expeditiously and services 

will be made available to the public as quickly as possible. This competition will especially benefit rural America—MVDDS spectrum is particularly well suited to proVerDate Nov 24 2008 11:49 Nov 15, 2013 Jkt 075679 PO 00000 Frm 00021 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\85549.TXT JACKIE
18 

viding broadband services in rural areas that are not served or underserved by 

cable, local telephone, and broadband Internet access service providers. 

MDS America hopes to be one of those competitors in the MVDDS market. We 

are based in Stuart, Florida, and we are the North American licensee of MDS International, the leading designer of terrestrial broadband transmission equipment in 

the Direct Broadcast Satellite (‘‘DBS’’) band. MDS International has deployed terrestrial broadband systems in numerous locations overseas, providing video programming and high-speed Internet services to many delighted subscribers. Some of these 

systems share frequencies on an interference-free basis with DBS–DTH satellite 

services in their areas. 

MDS America hopes to introduce this innovative terrestrial broadband technology 

into the U.S. market. As I noted previously, we strongly support the FCC’s May 

2002 decision to auction the MVDDS spectrum for terrestrial use. By establishing 

a level playing field, the FCC will encourage the most efficient and rapid introduction of the MVDDS spectrum-sharing technology throughout the United States. 

If S. 564 were to pass, however, MDS America and other hopeful-MVDDS providers could be delayed or denied the opportunity to compete, because the MVDDS 

spectrum at issue in this hearing today could be given away, for free, to one company, Northpoint Technology, or to an arbitrarily limited number of potential operators. This one company, Northpoint Technology, curiously has never built or deployed a broadband system anywhere in the world. The only ‘‘systems’’ ever built 

by Northpoint, to our knowledge, involve one or perhaps two transmitters with limited bandwidth. MDS America seriously questions whether Northpoint even has the 

ability to deploy a commercially viable broadband system of any type. In any event, 

should S. 564 become law the selection of MVDDS spectrum ‘‘winners’’ pursuant to 

this legislation will be subject to further regulatory scrutiny and delays, and, inevitably the losers in that FCC proceeding will seek legal relief in the courts, resulting 

in even further delays in deploying these critical services. 

Northpoint has been seeking legislative relief for years to circumvent the FCC’s 

normal spectrum licensing procedures, which, of course, were put in place by Congress. In January 1999, Northpoint submitted to the FCC applications and waiver 

requests for terrestrial use of the 12 GHz band, arguing that the FCC should waive 

its rules and grant it an uncontested license to operate terrestrially on the DBS 

spectrum. Northpoint claimed that it was the only company in existence with a noninterfering terrestrial technology in the 12.2 to 12.7 GHz band. It also argued to the 

FCC that its ‘‘unique’’ technology justified its demand that the FCC waive its established procedures and grant its license applications without consideration of other 

potential applicants. 

We beg to differ, and so did the FCC. The FCC denied Northpoint’s request and 

scheduled the 12.2 to 12.7 GHz spectrum for auction, noting ‘‘several parties have 

indicated that they have the ability to reuse spectrum in the 12.2 to 12.7 GHz band 

and seek the opportunity to do so as well.’’ As you know, the MVDDS radio channels 

were scheduled to be auctioned by the FCC commencing on June 25, 2003, but the 

auction was recently postponed due to the FCC’s consideration of changes to its 

MVDDS licensing rules. 

Despite the FCC’s denial of Northpoint’s waiver request, Northpoint continues to 

urge passage of S. 564 which, if adopted, would prevent the spectrum from being 

auctioned, literally give the spectrum away, for free, and result in the loss of millions of dollars to the U.S. Treasury. Moreover, passage of S. 564 could mean no 

competition in the MVDDS market, and the denial or further delay of broadband 

services precisely where such services are needed the most: rural and underserved 

areas. 

MDS America asks you to oppose Northpoint’s unprecedented spectrum grab 

through supporting the FCC’s decision to auction this very valuable spectrum under 

the FCC’s normal licensing procedures. We are not asking for special treatment: 

MDS America simply wants the opportunity to bid on the MVDDS spectrum in an 

FCC auction. 

MDS America asks you to consider the following with respect to Northpoint’s efforts seeking passage of S. 564: 

Point 1: Northpoint’s argument for special treatment is based on the inaccurate 

premise that it alone has technology capable of interference-free use of the 12.2 

to 12.7 GHz band. 

Through a technology license granted by MDS International, MDS America 

holds the exclusive U.S. rights to MDS International’s innovative technology, including terrestrial broadband wireless technology capable of transmitting video 

and very high-speed Internet data at 12.2 to 12.7 GHz, without causing interference to satellite services sharing the same frequency band. In addition, MDS 

19 

International has granted MDS America ownership of any present or future 

patents it may hold or apply for. MDS International’s systems have achieved 

a remarkably robust data delivery speed of 12 MBPS to the individual consumer. 

MDS International has been developing its terrestrial broadband wireless systems since 1986, which it operates successfully in other parts of the world. MDS 

International sold its first terrestrial broadband wireless system to the U.S. 

government in 1996 to provide video services to U.S. armed forces stationed in 

Oman. In fact, to the best of our knowledge, MDS International is the only company in the world today with operational terrestrial systems of this type. Many 

of these systems use the same KU-band frequencies as satellites serving the 

same localities without any significant interference. 

A recent tender in the United Arab Emirates for the largest MVDDS system 

ever built was won by MDS International over six other companies. MDS International subsequently built the first phase of this system beaming 154 digital 

TV channels to the entire area of Al-Ain in the UAE. The signal has been reliably received at a distance over 70 kilometers from the transmission site at 

Jabel Hafite. This system has a total channel capacity of 500 digital channels 

spanning 700 MHz of radio bandwidth (by comparison, the FCC’s MVDDS rules 

will allow 500 MHz of bandwidth for each licensed system). This means that 

the MDS International system is larger than any system that could be built in 

the U.S. under present FCC licensure rules and is the largest system of its type 

in the world. The UAE company, Etisalat, that owns this system is owned by 

the government of the UAE who would field complaints of DBS interference by 

Emirati citizens had there been any. At this writing, this MVDDS system has 

been operational for over seven months without a single interference complaint. 

In addition, Etisalat has ordered three additional systems of the same size for 

the emirates of Dubai, Sharjah, and the City of Abu-Dhabi from MDS International. They have announced intentions for ordering eight more in the near 

future. 

The Northpoint system, if it indeed exists, has never been commercially deployed anywhere in the world. In the above-mentioned tender, Northpoint was 

not even qualified to bid. 

Point 2: Northpoint’s legal claims were rejected by the FCC. 

After a lengthy rulemaking proceeding at the FCC during which a wide variety 

of views and concerns were expressed, the FCC rejected Northpoint’s request for 

an exclusive nationwide license for the terrestrial use of the DBS spectrum. 

Upon a close examination of all relevant statutes and citing Congressional intent, the FCC explicitly rejected Northpoint’s legal claim that both the ORBIT 

Act and the LOCAL TV Act bar the use of competitive bidding procedures to 

assign licenses for MVDDS in the DBS band. The FCC’s decision to license competitive MVDDS services, reached after years’ worth of deliberation, reflects a 

‘‘carefully crafted balance of technical and policy concerns.’’ 

Point 3: The MDS America Position: Pro-Competition, Pro-Consumer, Pro-Taxpayer. 

Northpoint’s anticompetitive effort to get MVDDS licenses without an auction, 

through the adoption of S. 564, should be rejected. Instead, the spectrum auction should proceed as planned. In this way, potential MVDDS providers will 

have the opportunity to compete to offer the best products, technologies, and 

services at the best prices. This is pro-consumer, pro-taxpayer, and consistent 

with the goals of the Communications Act. The FCC’s rules are ‘‘technologically 

neutral,’’ which is how it should be. The carriers with the best technologies will 

compete to offer the best services. 

Point 4: The MDS America system has been successfully tested. 

In May 2001, the FCC granted MDS America an experimental license to demonstrate that its MVDDS technology, already successful in other parts of the 

world, would not cause harmful interference with DBS transmissions in the 

U.S. Pursuant to this license, LCC International, an internationally recognized 

engineering and consulting firm working independently of MDS America, conducted a series of tests of the MDS system in 12 separate locations around Florida. In its written report, which has been submitted to the FCC and which has 

not been questioned by any interested party other than Northpoint, LCC concluded that the MDS system can be successfully deployed without causing 

harmful interference with DBS systems operating at the same frequencies. A 

copy of the LCC report is available on MDS America’s website at 

20 

www.mdsamerica.com. Moreover, the FCC’s rules have been carefully designed 

to guard against harmful interference to satellite systems. 

Point 5: The MDS America System is economically viable in Rural America. 

MDS America’s MVDDS system, as deployed elsewhere, is particularly well 

suited for deployment in rural areas untouched by cable and served exclusively 

by DBS operators. MDS MVDDS cells, using technology like that used in the 

UAE, can reach the curve of the earth, allowing MDS America to deliver signal 

over thousands of square miles. With their extensive coverage capabilities, MDS 

America’s cells are likely to reach enough of the population in rural areas of 

the U.S. to actually pay for the deployment of an MVDDS system. According 

to Northpoint’s own press filings, the cell range of their system is only 100 

square miles, not enough to make it an economically viable venture in the least 

populated areas of the U.S. 

Conclusion 

In closing, we at MDS America urge you to support the FCC’s decision to auction 

this very valuable spectrum under the FCC’s normal spectrum auction procedures. 

I would like to thank you again for the opportunity to testify here today in this 

hearing on behalf of MDS America. 

Senator BURNS. Thank you, Mr. Kirkpatrick. We appreciate that 

very much. 

Now we have Mr. Thomas Hazlett, Senior Fellow, Manhattan Institute for Policy Research. Thank you for coming today. 

STATEMENT OF THOMAS W. HAZLETT, SENIOR FELLOW, 

MANHATTAN INSTITUTE FOR POLICY RESEARCH 

Mr. HAZLETT. Thanks for having me—— 

Senator BURNS. You want to pull that microphone over so that 

we have got you on record here, the dulcet tones. 

Mr. HAZLETT. —thank you, Senator. I am Thomas Hazlett and 

I am a senior fellow at the Manhattan Institute for Policy Research, as you note. I am also a former chief economist of the Federal Communications Commission and I have written extensively 

about spectrum allocation policies in the United States and around 

the world. I have also previously served as a consultant to 

Northpoint Technology and have submitted testimony to the Federal Communications Commission on their behalf. 

The case of Northpoint Technology reveals ongoing infirmities in 

the U.S. spectrum allocation system. In a more efficient world, innovative wireless companies such as Northpoint would simply buy 

the spectrum they need, much as any company buys labor, raw materials, and capital inputs. Barriers to entry would be low and new 

competitors could quickly test their technologies with consumers in 

the marketplace. 

But, despite license auctions, the U.S. does not have anything approaching competitive bidding for spectrum. Firms attempting to 

offer novel wireless services must first convince the Federal Communications Commission planners that it would be in the public interest for spectrum to be allocated for their project. It is an understatement to say that this is a costly and time-consuming process. 

In it, the applicant must reveal its business plan, negotiate endless 

regulatory details with agency staff, negotiate spectrum- sharing 

rules with incumbent users, and do virtually all the heavy lifting 

in surmounting regulatory barricades designed, not to welcome rivals, but to foreclose them. License auctions, ironically, lift the 

walls. 

21 

Should a competitive technology, however improbably, get past 

the allocation contest, it must now buy back its business plan from 

the Federal Government. In this, it will compete with established 

service providers which have strong incentives to outbid the potential entrant simply to lessen the impact of new competition. 

In Northpoint’s case, I have estimated that either of the two incumbent satellite TV suppliers would bid several billion dollars 

above the highest bid that Northpoint might plausibly make for 

MVDDS licenses owing to the economic gain associated with avoiding price reductions. On an annual basis, cable and DBS subscribers would expect to pay at least $2.75 billion less in subscription fees were Northpoint to enter the market. It should also be 

noted that these gains have been lost for several years already simply due to the delay imposed on Northpoint’s entry by the FCC 

rulemaking process. 

License auctions are very useful for assigning rights among 

roughly comparable applicants. The firm willing to pay the most to 

offer service is, all else equal, the firm that will likely do the best 

job of providing service to the public. But where applicants are distinguished, other assignment rules can be more efficient. Indeed, 

many, if not most, FCC licenses are still assigned by non-auction 

procedures because of the disruptive effect auctions have on telecommunications investment. 

Specifically, the FCC does not invite competing bids for incumbents’ license renewals. To do so would destroy incentives for licensees to invest in technology, capital, or a reputation for high 

quality service. All such investments could be substantially appropriated by others, including the Government, were a license to be 

put up for bids at expiration. Policymakers realize this and avoid 

economic losses by simply renewing licenses for law-abiding licensees. 

But FCC regulators do not recognize that the same economic 

misallocation occurs when new entrants are appropriated after investing substantial resources in gaining spectrum allocation, the 

case of Northpoint Technology. The message this sends to 

innovators is clear: Give up early. If you seek to move the FCC to 

allocate spectrum to a new technology, you will invest years of hard 

labor, millions of dollars, for the right, if you succeed, to bid for a 

license against other interests who contributed not a kopek. Innovation grinds to a halt while entrepreneurs wait for someone else 

to shoulder spectrum allocation burdens. 

Let me just read to you, by the way, the FCC’s language. I 

should say this is two commissioners, the Chairman and Commissioner Kathleen Abernathy—in a recent rulemaking on MVDDS. 

This note says, ‘‘Northpoint arrived at the commission many years 

ago with a proposal for a new and innovative way to share the DBS 

spectrum. There is little question that had it not been for 

Northpoint the MVDDS service would not be ready to move forward today. Northpoint has put significant time and resources into 

developing its service model, as well as its commission and congressional advocacy over a long period of time. We applaud these efforts.’’ 

That is the end of the quote. My comment: the applause leads 

to congratulations and an invitation to join an auction to bid 

22 

against their rivals for the opportunity, the business opportunity 

they have created. 

This tragedy of the commons leads to underinvestment, underinvestment in innovation, and consumers lose valuable new wireless options while paying higher prices for less competitive services. 

The long-term solution is to reform spectrum allocation, allowing 

markets to efficiently shift bandwidth from less useful enterprises 

without government approval. In the near term, applicants who do 

invest substantial resources to bring about productive new uses of 

radio spectrum should not be appropriated, but rewarded. I think 

that the legislation being considered here is a step in that direction. 

I have outlined—on my part, I have outlined a simple two-part 

test for regulators at the Federal Communications Commission to 

use. This is outlined in my paper ‘‘Anti-Competitive Uses of Competitive Bidding, the FCC’s MVDDS Rulemaking,’’ a very snappy 

title. I am happy to make this paper available today to any interested party or electronically. My address is twhazlett@yahoo.com. 

Thank you very much. 

[The prepared statement of Mr. Hazlett follows:] 

PREPARED STATEMENT OF THOMAS W. HAZLETT, SENIOR FELLOW, MANHATTAN INSTITUTE FOR POLICY RESEARCH

My name is Thomas Hazlett, and I am Senior Fellow at the Manhattan Institute 

for Policy Research. I am a former Chief Economist of the Federal Communications 

Commission, and I have written extensively about spectrum allocation policies in 

the U.S. and around the world. 

The case of Northpoint Technology reveals ongoing infirmities in the U.S. spectrum allocation system. In a more efficient world, innovative wireless companies 

such as Northpoint would simply buy the spectrum they need, much as any company buys labor, raw materials, and capital inputs. Barriers to entry would be low, 

and new competitors could quickly test their technologies with consumers in the 

marketplace. 

But, despite license auctions, the U.S. does not have anything approaching competitive bidding for spectrum. Firms attempting to offer novel wireless services must 

first convince Federal Communications Commission planners that it would be in the 

public interest for spectrum to be allocated for their project. 

It is an understatement to say that this is a costly and time consuming process. 

In it, the applicant must reveal its business plan, negotiate endless regulatory details with agency staff, negotiate spectrum sharing rules with incumbent users, and 

do virtually all of the heavy lifting in surmounting regulatory barricades designed 

not to welcome rivals but to foreclose them. 

License auctions ironically lift the walls. Should a competitive technology, however improbably, get past the allocation contest, it must now buy back its business 

plan from the Federal government. In this it will compete with established service 

providers which have strong incentives to outbid the potential entrant simply to 

lessen the impact of new competition. In Northpoint’s case, I have estimated that 

either of the two incumbent satellite TV suppliers would bid several billion dollars 

above the highest bid Northpoint might plausibly make for MVDDS licenses, owing 

to the economic gain associated with avoiding price reductions. On an annual basis, 

cable and DBS subscribers would expect to pay at least $2.75 billion less in subscription fees. It should also be noted that these gains have been lost for several 

years simply due to the delay imposed on Northpoint’s entry by the FCC rulemaking 

process. 

License auctions are very useful for assigning rights among roughly comparable 

applicants. The firm willing to pay the most to offer service is, all else equal, the 

firm that will likely do the best job of providing service to the public. 

But where applicants are distinguished, other assignment rules can be more efficient. Indeed, many if not most FCC licenses are still assigned by non-auction procedures because of the disruptive effect auctions would have on telecommunications 

investment. Specifically, the FCC does not invite competing bids for incumbents’ license renewals. To do so would destroy incentives for licensees to invest in techVerDate Nov 24 2008 11:49 Nov 15, 2013 Jkt 075679 PO 00000 Frm 00026 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\85549.TXT JACKIE
23 

nology, capital, or a reputation for high-quality service. All such investments could 

be substantially appropriated by others (including the government) were a license 

to be put up for bids at expiration. Policy makers realize this, and avoid economic 

losses by simply renewing licenses for law-abiding licensees. 

But FCC regulators do not recognize that the same economic misallocation occurs 

when new entrants are appropriated after investing substantial resources in gaining 

a spectrum allocation—the case of Northpoint Technology. The message it sends to 

innovators is: give up early. If you seek to move the FCC to allocate spectrum to 

a new technology you will invest years of hard labor, and millions of dollars, for the 

right (if you succeed!) to bid for a license against other interests who contributed 

not a kopek. Innovation grinds to a halt while entrepreneurs wait for some one else 

to shoulder spectrum allocation burdens. 

This tragedy of the commons leads to under-investment, and consumers lose valuable new wireless options while paying higher prices for less competitive services. 

The long-term solution is to reform spectrum allocation, allowing markets to efficiently shift bandwidth from less useful enterprises without government approval. 

In the near-term, applicants who do invest substantial resources to bring about productive new uses of radio spectrum should not be appropriated but rewarded. I have 

outlined a simple two-part test in my paper, ‘‘Anticompetitive Uses of Competitive 

Bidding: The FCC’s MVDDS Rulemaking,’’ which would allow regulators to distinguish when license auctions are appropriate under the current spectrum allocation 

process. I am happy to make this paper available to any interested party today, or 

electronically. My address is: twhazlett@yahoo.com. 

Senator BURNS. Now we have Mr. Larry Roadman, President, 

Marketville—Margaretville Telephone Company, Margaretville, 

New York. 

STATEMENT OF LARRY S. ROADMAN, PRESIDENT, 

MARGARETVILLE TELEPHONE COMPANY, INC. 

AND MANAGER, WIRELESS ACCESS LLC 

Mr. ROADMAN. Mr. Chairman, I am not familiar with the procedures and my testimony is going to diverge into—I could plead that 

it is going to bring us back down to earth in the 700 megahertz 

and LPTV spectrum. But I wonder if I could request that my testimony be submitted in full into the record and that I be available 

for questions on LPTV and 700 megahertz, but I am clearly going 

to digress from the rather interesting interchange that is going to 

occur. 

Senator BURNS. Without objection, your full statement will be 

made part of the record. Is there some way you want to—maybe 

you can summarize it? 

Mr. ROADMAN. In what I wanted to do—I represent an independent local exchange carrier, a small telephone company, a little 

cable company, a little ISP in upstate New York, which is not all 

that different from Montana or New Hampshire. But I wanted to 

make some points, and my testimony does, as far as, one, making 

clear—and I think everybody recognizes this, but sometimes it is 

good to clarify—that we are really not talking, when we are talking 

about underserved areas, we are really not talking about rural 

areas alone. 

I happen to live 28 miles from New York City. New York City 

is wonderfully served by broadband. My customers at 150 miles 

from New York City have wonderful access to broadband, both DSL 

and cable modem. But I, 28 miles from New York in Westchester 

County, a rich suburb of New York City, commuting suburb, have 

been told, just do not bother asking for DSL. And I just got access 

to cable modem service about a month-and-a-half ago. 

Senator BURNS. Do you like it? 

24 

Mr. ROADMAN. Yes, sir. 

Senator BURNS. Good. 

Mr. ROADMAN. Again, there are some things in my testimony, requests for action by Congress in the 700 megahertz and in the unlicensed spectrum, that are fine in the record. I really do not want 

to digress from—I do want to thank you, though, chairman, for all 

of your efforts, both on the LPTV bill a couple years ago and in the 

ongoing efforts like the broadband investment, rural broadband investment expensing. 

But I will digress from here and I do not want to do that. 

[The prepared statement of Mr. Roadman follows:] 

PREPARED STATEMENT OF LARRY S. ROADMAN, PRESIDENT, MARGARETVILLE

TELEPHONE CO. INC. MANAGER, WIRELESS ACCESS LLC 

Good afternoon, Chairman Burns and members of the subcommittee. I am honored to testify before you today on an issue of extreme importance to rural Americans and the rural telecommunications carriers that serve them. Mr. Chairman, I 

want to recognize and commend your ongoing effort to promote the economic health 

of rural areas. Specifically I want to recognize the LPTV Digital Data Services Pilot 

Project legislation passed in 2000 and your current bill proposing the expensing of 

rural broadband capital investments. 

My company, Margaretville Telephone Company, doing business as MTC, is an 

Independent Local Exchange Carrier (ILEC) serving the central Catskill region of 

upstate New York—an area that is indeed rural and economically challenged. MTC 

has been family owned and operated since 1916, though under an ESOP formed in 

1985, the 17 non-family employees own 30 percent of the company. MTC serves over 

4600 telephone access lines. In addition, MTC’s cable subsidiary serves over 1700 

subscriber units and our ISP, Catskill On Line (COL—a joint venture with a neighboring ILEC, Delhi Telephone Company) serves over 8300 Internet subscribers in 

four upstate New York counties. 

Within its telephone service territory, MTC offers DSL to 95 percent of its telephone subscribers and cable modems to all cable subscribers. Outside of its service 

territory, MTC offers cable modem service where it has built cable facilities to serve 

villages near Margaretville and wireless high speed data connections in Oneonta, 

New York, a tertiary market city 45 miles from Margaretville. Since early 2001, we 

have deployed equipment in the unlicensed 2.4Ghz spectrum and are currently 

using 802.11 equipment to create a ‘‘hot zone’’ service, covering much of the City 

of Oneonta. 

In anticipation of offering high speed services throughout the underserved central 

Catskill region, MTC has sought spectrum assets over the past eight years. Through 

FCC auctions, it has purchased whole or partnership interests in PCS, LMDS and 

700Mhz licenses. In addition, it joined with several other companies to form Wireless Access, LLC, the owner of three low-power TV (LPTV) licenses designated as 

test stations under in the LPTV Services Pilot Project legislation of 2000. We are 

eager and ready to deploy LPTV and/or 700Mhz broadband services when equipment is readily and economically available. 

* * * * * * * 

Policymakers, service providers and subscribers all recognize there is, or soon will 

be, a very real need for broadband accessibility wherever you live and work, whether it is in rural Montana, suburban New York or downtown Washington, D.C. The 

extent and actual location of the underserved areas in this country may not be as 

well understood. 

While my customers in Margaretville, 150 miles from New York City and in the 

northern reaches of the Appalachian poverty belt, have had access to DSL or cable 

modem broadband services, or both, for almost two years, I, living in Westchester 

County, just 28 miles from New York City and in one of the richest counties in the 

country, have only had access to cable modem service since early this year and have 

been told repeatedly not to expect DSL access any time soon. Interestingly, the latest survey by the National Telephone Cooperative Association shows that, by the 

end of this year (2003), 47 percent of its member companies plan to offer broadband 

services to all customers within twelve thousand feet of any fiber-fed nod in their 

systems. By that time only 5 percent of the companies intend to be offering only 

dial-up Internet service. 

25 

By making broadband services to their customers, one thousand plus independent 

telephone companies are acting as very effective ‘‘economic engines’’ in rural America. By offering these services in areas outside their traditional territories, by actually ‘‘reaching out’’ into tertiary and, even, secondary markets, most often using 

wireless technologies, these companies are complimenting the efforts of the larger 

providers who are primarily focused on the urban, primary markets. 

* * * * * * * 

Utilization of the LPTV and 700Mhz spectrum bands holds great promise for 

broadband delivery in secondary, tertiary and rural markets, and even in urban industrial areas not traditionally served by cable. These frequencies allow robust and 

non-line-of-site service provision, well-suited for use in sparsely populated plains or 

mountainous regions, as well as in built up large cities or suburban centers. Recognizing this promise ILECS were some of the first investors in early LPTV two-way 

data efforts (even before the supporting legislation) and ILECS makeup approximately 60 percent of the successful bidders in the initial 700Mhz auction in 2002. 

In addition to expanding and accelerating broadband deployment, opening up the 

use of these spectrum bands offers Congress and the FCC three other opportunities. 

First, the establishment of licensed-band data services will enable the development 

of a stable, quality of service high speed data marketplace. Second, the addition of 

these two bands to the market will firmly establish a broad, competitive marketplace in high speed data. The active LPTV option and straight purchase market will 

determine what portion of the LPTV spectrum will be used for broadcast and what 

portion for two-way data. Third, unlike the expanding use of unlicensed spectrum, 

the expanding use of these two frequency bands will offer the opportunity of expanding government revenues through increased auction values and the growth of usage 

based fee revenues. 

* * * * * * * 

At least four actions by Congress and the FCC will significantly accelerate and 

enhance the development of a broad-based, healthily competitive broadband marketplace. 

(1) Legislation: Legislation like Senator Burns’ current bill proposing the expensing capital costs for broadband deployment will make business plans more 

achievable, aiding in the currently uphill battle for funding. 

(2) Focus on Licensed Spectrum: Furthering the deployment of licensed sustainable, higher quality, economically efficient broadband marketplace. 

(3) LPTV Spectrum Availability: The current economic situation has blocked efforts to raise funding necessary for progress on the Pilot Project, though an improving investment climate holds the promise of testing and development action 

in 2003. Robust development of the LPTV spectrum band will depend on a 

clear awareness that the FCC will expand two-way data usage past the initial 

13 legislative test stations. I call on Congress to exact that commitment from 

the FCC. 

(4) Clearing of 700 Mhz Spectrum: A significant portion of one 700 Mhz license 

block was acuctioned in 2002. The remainder of that block (along with one 

other block) will be auctioned in the next several months. Current license holders await the delivery of equipment from manufacturers. However manufacturers, as well as investors, are hesitant to move forward while broadcasters remain incumbent on many of the stations sold in the auction. The dates set for 

broadcasters to vacate these stations seem to be loosely administered and do 

not appear to be ‘‘dates certain’’. In order to assure the ability of license holders 

to use the 700 Mhz for broadband deployment, i.e., to move manufacturers and 

investors forward, I call on Congress to investigate what actions Congress and 

the FCC might take in either or both the broadcast and broadband markets 

to enhance and accelerate the viability of broadcasters vacating and licensees 

using the auctioned 700 Mhz and then to ensure that ‘‘dates certain’’ for 

vacating are both set and enforced. 

Senator BURNS. You do not want to start the fight too early here. 

I have a question for Mr. Hazlett, and thank you all for coming 

today and your statement, your full statement, will be made a part 

of the record and thank you. 

How do you define the marketplace that MVDDS would enter? 

Should we look at competition between MVDDS companies or 

26 

should we look at the competition among that technology of 

MVDDS along with cable and satellite and every other technology? 

How should we base our decision on making policy up here? 

Mr. HAZLETT. Do you have an easier question? You are asking 

me to define a market that does not exist yet? 

Senator BURNS. Yes, that is right. 

Mr. HAZLETT.If it is defined as MVDDS, so that is rough. My approach has been to look at the multi-channel video market, MVPD, 

as defined by the Federal Communications Commission, and I 

think actually this has been the FCC approach. So I am sort of 

comfortable looking at it that way, even though broadband, of 

course, is part of that and that can constitute competition with 

other service providers. 

Senator BURNS. How much of the Wi-Fi industry’s success can be 

attributed to the fact that its innovators are not subject to costs 

and delays of auctions? In other words, how have auctions affected 

their costs, and the difference between allocations and auctions? 

Mr. HAZLETT. Well, the ready access, the fact that they are unlicensed, means there is no license holdup, and so it is everything 

that goes with licensing, including the auctions. That is in there on 

the one side. That helps Wi-Fi a lot. 

What helps Wi-Fi maybe just as much or more is the fact that 

there are other problems everywhere else on the bandwidth licenses and with spectrum allocations. So Wi-Fi has been the one 

place where the action can take place. So on both sides of that, WiFi has benefited. 

Senator BURNS. I would ask all of you the same questions and 

you can comment on it. Should we look at competition between different MVDDS companies or should we look at competition among 

that technology plus cable, satellite, and so forth? I would like to 

hear all of you comment on that, please. 

Mr. KIRKPATRICK. Chairman Burns, if I can comment on a couple 

things. First of all, Dr. Hazlett talked about the $2 billion that the 

DBS industry could pay to keep people like me out of the market. 

That is ignoring the fact that 12.2 to 12.7 is not the only spectrum 

that a system like mine operates on. There is existing spectrum out 

there, 20 gigahertz, 40 gigahertz, 2.6 gigahertz, that we can and 

will build systems for that would exploit that as well. 

To answer your question about the competition in the market, 

this is specifically what we are after. At MDS America and MDS 

International we consider ourselves to be the only company in the 

world building systems in this frequency right now. We do not have 

at this present time competition. So when Dr. Hazlett talks about 

a new and innovative technology, for us this is not new. We have 

been deploying it almost 10 years now, so it is not a new and innovative technology for us. 

Senator BURNS. Mr. Wright? 

Mr. WRIGHT. Thanks, Mr. Chairman. I would say that the market is the multi-channel video marketplace. That is certainly what 

the FCC has been looking at and certainly how we look at it. 

I would like to respond to something Mr. Hazlett said, which is 

that he was suggesting that Charlie Ergen, the President of 

EchoStar Communications, might bid billions of dollars too much 

for a license. I would have to suggest that he probably has not been 

27 

listening to testimony over the last few years. I cannot imagine 

that happening. 

I would like to emphasize again what Kirkpatrick has just said, 

which is we are not interested—the DBS industry does not want 

to stop Northpoint or MDS America or anyone else from entering 

this market. There is plenty of spectrum out there that a wireless 

cable system such as the one proposed by Northpoint could use. 

You would hear no objections from us if they were going to the 

LMDS or MMDS or the CARS band. We have gone out of our way 

to suggest spectrum that we think would be just as good or better 

for propagation purposes for their system. 

We are just interested in them not interfering with us. We are 

also interested in them not being given a leg up against us, against 

DBS, against Mr. Kirkpatrick, against the other wireless cable providers. There is no public policy that we can see that would support 

giving them a gift of the public spectrum. 

Senator BURNS. Ms. Bush? 

Ms. BUSH. First I would like to remind everybody that when 

Northpoint filed its application in January 1999, we were the only 

company to file an application seeking terrestrial use, and we were 

the only company for many years to participate in this proceeding 

before the FCC. 

But the other point that I want to make is there were seven 

other companies who applied on the same day to use the exact 

same resource that Northpoint sought to use. People lose sight of 

that by trying to narrow this down to we are only going to look at 

MVDDS. The point is is that technology has advanced. With the 

move to digital, there are a lot more things we can do with spectrum than we used to be able to, and the idea that we are going 

to continue to put technologies in little niches and only look at 

them that way does not make sense. 

The issue is getting service to consumers and service to consumers in a way that is fair from the Federal Government’s standpoint to the applicants that are coming before the agency. So what 

we are talking about—people are saying we are trying to keep 

MDS out. That is not our intent. Our point is that we applied with 

seven other companies. The rules changed in the middle of the 

game. All we are saying is the rules should be the same for all applicants. 

Under S. 564, MDS America can participate in independent testing and be licensed. It does not prohibit or limit who can be licensed and it does not mandate in fact that the FCC give out any 

licenses. The FCC could conclude that there is nobody qualified to 

be licensed under this bill. It is simply a matter that if a company 

spends a decade at the FCC seeking a license that they ought to 

be licensed the same way. 

To your question, Senator Burns, of what the marketplace should 

be, I believe it should be the multi-channel video marketplace, 

which would include cable, it would include DBS, and it would include other Internet providers, that that is the market that we are 

looking to compete in, and on a going- forward basis all these entities should be licensed the same way. 

Mr. WRIGHT. Mr. Chairman, may I respond to that? 

Senator BURNS. You bet. 

28 

Mr. WRIGHT. Mr. Chairman, I think it is important to point out 

Tony does not, Tony Cook Bush does not, point out the fact that 

the application that they filed those several years ago was rejected 

as having been improperly filed. They filed in a procedure that had 

to do with the licensure of satellite spectrum and so the FCC properly rejected that application and started a whole new proceeding 

on this MVDDS to utilize to see who could best utilize the terrestrial use of the 12.2 to 12.7. 

Certainly MDS America has filed, Pegasus has filed. We suspect 

that if this goes to auction there will be several companies who will 

file. As Tony points out, technology has moved forward, and we 

suspect that there will be several companies that will file to use 

this spectrum. So although we think that the sharing should not 

be allowed, if it is going to be allowed then it certainly should not 

be granted to just one of the parties. Everybody who thinks they 

have a usage for the spectrum ought to have the opportunity to bid 

on it. Certainly I think my companies would be interested and I 

think that there are tons of other companies that would as well. 

Senator BURNS. Mr. Roadman? I want to finish this off. Mr. 

Roadman, do you want to comment on this? 

Mr. ROADMAN. I just agree that it should look across the market 

at the multi-channel video. 

Senator BURNS. OK. Do you want to follow up? 

Mr. KIRKPATRICK. Yes, Chairman Burns. I just wanted to say 

that obviously had the FCC opened a window for applying for terrestrial broadcasting in this spectrum, MDS would have filed an 

application as well. The window was open for non- geostationary 

satellite systems, which we do not build. We do not have anything 

to do with non-geostationary satellite systems and therefore we did 

not file an application in the non-geostationary satellite system 

window. It did not make any sense for us to do so. 

That being said, if the interest, and I am sure the Committee’s 

interest is, in rolling out this service quickly to rural areas, it 

would make sense that MDS America, representing MDS International, as the only company who has ever done it in this spectrum would be uniquely qualified to roll out the spectrum quicker 

than anybody, simply because all of the subsystems other than just 

the transmitter and the delivery of the radio signal we have in 

place. We have built these before, we are building them now. 

Senator BURNS. Senator Sununu. 

Senator SUNUNU. Thank you, Mr. Chairman. 

Ms. BUSH. Excuse me, Senator. I just cannot resist, and I apologize for this. But in response to what SBCA said, that we filed our 

application at an inopportune time, the only point I would make 

was that it was clear the FCC was not going to give us an opportunity to file an application. They did not believe our technology 

worked, they did not believe that terrestrial and satellite systems 

could share at the time. Had we not filed in that proceeding, we 

would—none of us would be sitting here today. 

Senator SUNUNU. Thank you. 

Mr. Hazlett, you did not really imply that the managers of the 

DBS satellite servers, Mr. Ergen or anyone else, would overpay by 

$2 billion for this spectrum if it was auctioned off, did you? 

Mr. HAZLETT. Not even close, no. 

29 

Senator SUNUNU. Do you want to clarify the point that you were 

making, because I think it is an important point. 

Mr. HAZLETT. Yes. Let us just take the official position of the 

United States Department of Justice in an interesting case, an 

antitrust adjudication in 1998. There you had a situation where 

PrimeStar, which then was the third satellite TV company, was 

going to buy some assets, some satellite assets, from NewsCorpMCI. And the DOJ moved in to block that combination. They said 

that the deal here was that PrimeStar was owned by cable companies and they did not really have an interest in using those DBS 

assets to compete with the other satellite TV companies and cable 

companies; they just wanted to sort of stockpile these assets and 

have sort of a low-ball competition that maybe offered medium 

service out where they did not have cable systems. They said that 

PrimeStar actually had been engaged in that strategy since 1990 

when it got going. So anyway, they blocked that. 

Now the same exact logic is here, that the DBS providers would 

pay up to several billion dollars more. Now, of course Northpoint 

or some entrant would drop out way before that. I say this clearly 

in my paper. So they would never overpay, but they would pay 

enough to protect their profits, and that is why setting up an auction this way is inherently anticompetitive. 

Senator SUNUNU. The point as I understand it is that where the 

resource is, the resource spectrum, is limited, the incumbent broadcaster would have an economic value to bid, quite significantly potentially, for the assets in order to keep them off the market and 

protect their competitive position? 

Mr. HAZLETT. Right, and that bid is not associated with efficiency, but with keeping prices higher. 

Senator SUNUNU. I think that point was made to a certain extent 

in a similar way in the chairman’s opening comments, that while 

auctions are in many cases efficient systems where the resources 

are limited, we are always going to have concerns that the public 

service—the public is being served and that the resource is being 

used in an economically efficient way. 

Mr. HAZLETT. Right. 

Senator SUNUNU. Mr. Wright, how many channels are allocated 

to DBS in the United States? 

Mr. WRIGHT. Senator, I am sorry; I do not know the answer to 

that question. I will have to get back to you. I will have to submit 

that for the record. I mean, we certainly carry hundreds of channels. 

[The information referred to was not available at time of print.] 

Senator SUNUNU. Maybe, is there anybody else here that works 

in the satellite industry that might have the answer to that question? 

Ms. BUSH. I believe they allocate them by slots and each slot has 

32 channels. And I believe there are approximately 200 channels 

amongst all the slots. 

Senator SUNUNU. But how many, how many slots are there existing? In other words, how many slots of spectrum have been provided to DBS carriers over time? 

30 

Ms. BUSH. Well, there are a total of 256 slots. EchoStar has approximately 190 of those. DirecTV has about 46 of those. There is 

a company RLDBS which I believe has a few. 

Senator SUNUNU. A couple of hundred, though, certainly? 

Ms. BUSH. Right. 

Senator SUNUNU. Mr. Wright, how many of those have been allocated through a competitive bidding process? 

Mr. WRIGHT. Mr. Chairman, all of the slots that have been allocated since Congress enacted the competitive bidding system have 

been allocated by AFL–CIO, and there are additional slots—— 

Senator SUNUNU. Well, but there are 200, 225 plus. How many 

of those went through the bidding, the competitive bidding process? 

Mr. WRIGHT. Mr. Chairman, when the early slots were allocated 

there was not a bidding process. So therefore those slots were 

not—— 

Senator SUNUNU. I understand that. I understand we are living 

in a modern age and time passes and things happen and you have 

auctions, you do not have auctions. But there are 226 slots out 

there that create the competitive environment for DBS. How many 

of them were auctioned? 

Mr. WRIGHT. I do not know the answer to that, Mr. Chairman. 

Senator SUNUNU. Would you get me the answer to that for the 

record? 

Mr. WRIGHT. I can get back to you on that, yes, sir. 

[The information referred to was not available at time of print.] 

Senator SUNUNU. Please. 

Mr. Hazlett, Ms. Bush? 

Ms. BUSH. There were two slots that were auctioned and, unfortunately, I do not know if they were full 32 channels each. All of 

the rest of the slots had not been auctioned—— 

Senator SUNUNU. Are you suggesting two out of the 225? 

Ms. BUSH. No, I am suggesting something less than 60 out of the 

225 channels were subject to an auction. 

Mr. WRIGHT. Mr. Chairman, someone just handed me a note saying 64 have been auctioned thus far, and I believe 98 were allocated prior to that without auction. But again, I will confirm that 

and get back to you with an exact number. 

Senator SUNUNU. I appreciate that. This is an important point 

because we are discussing a level playing field, one way or another 

how to ensure that we have both a level playing field and the efficiency of use that I talked about earlier. 

Mr. Kirkpatrick, do you believe that those channels that were 

not auctioned off should be retaken by the Federal Government 

and auctioned? 

Mr. KIRKPATRICK. Senator Sununu, I do not believe that those 

channels should be taken back and re-auctioned. In fact, in pleading ignorance I think it is inappropriate for me to answer the question. I would like to comment on it this way. The DBS industry and 

MVDDS are not the only players in this market. The big player in 

this market is the cable industry and the DBS industry, far from 

spending $2 billion to quash Northpoint and MDS America, has a 

much higher vested interest in competing with an established cable 

industry. 

31 

The one thing that we all need to keep in mind here, and you 

have to keep in mind that I am a technical person; I am not a lawyer, that the cable people have a pipe running into the house which 

has unlimited bandwidth. The satellite people do not. Neither do 

MVDDS providers. So even were the DBS providers to bid in this 

auction, it would be senseless for them to warehouse the spectrum 

since they could come to MDS America, for example, implement 

MDS America-type systems to vastly increase their available bandwidth to compete with cable in the markets where they are losing 

against cable in urban areas. 

Senator SUNUNU. I appreciate that point, although no one suggested that they would warehouse the spectrum. The point that 

was made, and it is an important point, is that they have by virtue 

of their incumbency, have an economic value that they can place 

on that spectrum that is much higher than non-incumbent carriers, 

regardless of what they choose to do with it. There is a price at 

which it would be of economic value for them to warehouse it. 

But you are right, they probably would not do that. But regardless of whether they resell it, whether they use it themselves, or 

whether they warehouse it, the economic point Mr. Hazlett is making is that they have a greater economic value for that spectrum 

than other non-incumbent carriers. 

Mr. Hazlett is gesturing. Please, if you want to add a comment. 

Mr. HAZLETT. Yes, I just wanted to emphasize that. The argument is not that they would warehouse it, but quite the reverse. 

They would use it. It would be deployed. They just would not lower 

their prices. So it would keep prices higher and consumers would 

suffer because of the lack of competition. 

Mr. WRIGHT. Well, Mr. Chairman, Mr. Sununu, if I can respond 

to that. Obviously the incumbent here, the real incumbent here, is 

cable, and they are the ones who have practically a monopoly position. They have had a monopoly position in the market, and only 

now are we beginning to see some signs of competition as DBS, 

which has worked for 9 years now to get to 20 percent of the market. 

The issue here is not is DBS some sort of powerful incumbent—— 

Senator SUNUNU. No, no. That is a very good point. But all you 

are suggesting is that there are other incumbent broadcasters like 

cable that might also have an interest in bidding, bidding at a very 

high level for the spectrum, again that they have a higher economic 

value than other non-incumbents. Whether a DBS incumbent or a 

cable incumbent, you may still have the same economic incentive. 

Let me run through my questions and obviously you will have a 

chance to comment further. 

License fees. Ms. Bush, would you object to a system where the 

Government would charge a fee, a license fee, to everyone providing multi-channel service in the 12.2 to 12.7 range? 

Ms. BUSH. Well, I think the key issue is to everyone providing 

service in spectrum, because I think this then falls into the trap 

we keep falling into, which is, of being too narrow, because for example in this proceeding you have seven non-geostationary satellite 

applicants, who are also going to be sharing the spectrum. While 

they are not going to be providing multi-channel video, they are 

32 

going to be providing Internet service, so they are going to be a 

competitor in part of the market with us. 

So I think the issue from Northpoint’s standpoint is regulatory 

fairness across the board, that we have got to treat all of the applicants using spectrum the same way. 

Senator SUNUNU. Mr. Wright, do you support that? 

Mr. WRIGHT. Yes, thank you, Mr. Sununu. It is only in circumstances where there are multiple competitors wishing to use 

the same spectrum where an auction situation applies, and 

NGSOFSS was excluded by Congress. In other words, the FCC 

could not have chosen to auction that spectrum off because of 

the—— 

Senator SUNUNU. I am sorry, I am not talking about an auction, 

though. I am talking about annual fees for the use of the spectrum. 

Mr. WRIGHT. Well, of course annual fees are already charged for 

the use of the spectrum. 

Senator SUNUNU. I stand corrected. 

Ms. Bush, I think Mr. Wright used the term ruinous interference. Under what circumstances would your proposed system 

cause ruinous interference to those that are enjoying their DirecTV 

or other satellite services at home? 

Ms. BUSH. Under no circumstances. We have tested our system 

now four times. Actually we tested it three times. The FCC tested 

it once through the MITRE Company and the DBS industry got a 

license for experimental testing of our system as well. 

The point I would make is that we operate our system, the DBS 

industry had the opportunity to operate our system without our involvement or approval, and under no circumstance was there any 

interference to any existing DBS customers. Northpoint tested in 

Washington, D.C., on the USA Today Building for 2 months nonstop, including through Hurricane Floyd. The DBS industry, 

DirecTV and EchoStar, conducted testing in Washington, D.C., as 

well in an effort to prove this ruinous interference which they 

claimed would happen, and they were not able to provide to the 

FCC evidence of one DBS customer that received interference. 

So our point is that the DBS industry could not prove through 

their testing that there was interference and that ultimately was 

the FCC’s conclusion, that throughout all this testing there was no 

interference. 

Mr. WRIGHT. Mr. Chairman. 

Senator SUNUNU. Do you agree with all of that? 

Mr. WRIGHT. Obviously this is an area where we have serious 

disagreement. 

Senator SUNUNU. I appreciate that, but try to be clear in at least 

describing where the important areas of disagreement are. 

Mr. WRIGHT. Yes, thank you. Our position is that it will cause 

serious interference, and that is what the MITRE test, the only 

independent test, the MITRE test, showed, that it would cause serious interference to DBS. 

The issue, of course, at the FCC was not whether or not it is 

going to cause interference, but whether or not it would cause significant harmful interference. Harmful interference is a subjective 

standard. So far we have not been able to persuade the FCC that 

33 

it is going to cause harmful interference, so we are taking it to 

court. 

But the point is that no matter what kind of testing you do and 

what kind of operation you do, DBS subscribers are not going to 

know that—they are going to know that their system does not work 

as well as it used to. They are not going to know that Northpoint 

is out there. They are not going to say, well, gee, this is too bad 

that Northpoint is causing interference to my system. 

What they are going to say is, gee, my DBS system that used to 

be so reliable is no longer reliable, so I am going to go back to 

cable. That is going to be the result in the market. That is our concern. 

Senator SUNUNU. What interest would those technically competent people at the FCC possibly have in claiming that there 

would not be harmful interference when, at least in your opinion, 

there would be ruinous interference? How could the FCC be so 

blind to what is or is not a technical reality? 

Mr. WRIGHT. Well, Mr. Sununu, what Northpoint is proposing to 

do is to build 15,000 towers around the United States to provide 

their service. The closer you are to the service, the more interference your DBS system is going to receive. So while it is millions 

of DBS subscribers, it is certainly not all DBS subscribers; and 

what the FCC has decided is that the amount of interference, the 

increased amount of unavailability that Northpoint will introduce 

into the DBS system, is in their opinion offset by the introduction 

of a new player into the market. We disagree with that. 

Mr. KIRKPATRICK. Senator Sununu. 

Senator SUNUNU. Mr. Hazlett, you raised your hand first, and 

then we will hear from Mr. Kirkpatrick. Thank you. 

Mr. HAZLETT. Thank you, Senator. I have read about what the 

FCC has said about the maximum allowable new interference, 

which by the way, there is possible interference from any new wireless service anywhere. If you had a zero tolerance policy you would 

have zero wireless service. So it is all about what is harmful and 

what is the de minimis standard. 

So I have read what the FCC has concluded on this and it really 

is pennies, just pennies of interference, even if you take the maximum allowable interference on a monthly basis. Remember this: 

If you insert another competitor, and let us call this Multi-Channel 

Video for a minute, so you get two DBS, one cable and you add a 

fourth competitor; by the FCC’s competitive analysis, that is going 

to lower prices by at least 5 percent, at least 5 percent. 

The average DBS customer pays about $60 a month in revenue 

right now. Five percent of that is $3 a month. The loss to the DBS 

customer is not from harmful interference from the new entrant. 

The loss is from blocking the competition that is going to lower his 

or her price. So the economics of this are very, very straightforward 

and the FCC has decided this interference issue in a way that 

makes it very simple to see that keeping out the new entrant does 

not protect the current subscribers, but hurts them. 

Mr. KIRKPATRICK. Senator Sununu, one other thing I would just 

like to add. Prior to the MITRE test, MDS America offered our 

equipment to the FCC for testing by MITRE and the FCC told us 

34 

that Congress had not funded testing equipment for people who 

had not applied in the NGSO window. 

MDS America then offered to pay MITRE directly through the 

FCC for us to fund the test ourselves, at which time we were also 

informed that MITRE was prohibited by charter from taking private funding for doing the test. MDS America then hired an independent testing firm, LCC International out of McLean, who came 

to southern Florida and, pursuant to an FCC experimental license, 

did test our system independently of us in a real world environment, not in an anechoic chamber in a laboratory, but by actually 

putting our transmitter, our system, out on a tower in the presence 

of existing DBS customers and testing it over a period of several 

weeks. 

We received no complaints whatsoever. We now are in the middle 

of a phase two testing where we have been broadcasting from the 

top of the tower at a much higher power level than the MVDDS 

order allows, but again pursuant to our experimental license, and 

again we have not received a single complaint of interference to 

DBS anywhere in southern Florida. 

Senator SUNUNU. So you do not believe that your terrestrialbased broadcasting system will cause ruinous interference to existing DBS users? 

Mr. KIRKPATRICK. It has not since 1994 in the places it has been 

installed all over the world. 

Mr. WRIGHT. Mr. Sununu, may I follow up on that? 

Senator SUNUNU. Sure. 

Mr. WRIGHT. There are already in this spectrum, in the 12.2 to 

12.7 spectrum, there are already two ubiquitous consumer services. 

There is DBS and there is NGSOFSS. When we were required to 

negotiate by the two satellite systems that share it, NGSO and 

DBS, it is much easier for satellite-to-satellite to share than satellite-to-terrestrial. And when we negotiated that there was a requirement that the NGSO entrant into the market not increase the 

unavailability of DBS by more than 10 percent. So now we had 

that 10 percent of unavailability increase in the market. 

The FCC itself has said that the introduction of Northpoint will 

cause an additional 30 percent increase in unavailability. We can 

quibble about the word ruinous, but to us increasing unavailability 

by 30 percent, and Commissioner Martin in his dissent said that 

it could be 60 percent or 90 percent increase. 

Senator SUNUNU. I am sorry, I do not understand that. If the 

regulation is 30 percent, how could it be 90 percent? 

Mr. WRIGHT. What the FCC said is at a minimum the increase 

in unavailability will be 30 percent. Commissioner Martin in his 

dissent said, at 30 percent, you are not setting it at 30 percent; you 

are saying it could be 30 percent; it could be 60 percent, it could 

be 90 percent. So we think that it is a very serious challenge to 

our consumers. 

What is going to end up happening here is you have got an industry that has spent a tremendous amount of money and energy 

and time to create a real competitor to cable and now you are going 

to introduce all of this additional. You are trying to shoehorn a 

third ubiquitous consumer service into this 12.2 to 12.7 band. It is 

unprecedented, and we think that it certainly will cause serious inVerDate Nov 24 2008 11:49 Nov 15, 2013 Jkt 075679 PO 00000 Frm 00038 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\85549.TXT JACKIE
35 

terference to our consumers and will be anticompetitive and will 

reduce choice in the market. 

Senator BURNS. Well, Mr. Wright, in this bill, though, there is 

if there is any serious interference that they cannot operate there. 

I think that is the way it is worded, is it not, Senator Sununu? 

Senator SUNUNU. That is correct, and I am curious to hear Ms. 

Bush’s response to the suggestion that there will be a 30 percent 

loss of performance. 

Ms. BUSH. I think that is an incorrect reading of the FCC order. 

The FCC came up with the way that both the satellite companies 

and the DBS, I mean, the terrestrial operators that are going to 

share the DBS band. The FCC set certain limits to ensure that at 

a consumer’s home you would not cause interference above a certain level, which can be measured. It is a formula that you use 

similarly for the satellite companies and for the terrestrial companies. 

The FCC did not conclude that at a minimum there would be 30 

percent interference and I am, to be honest, not sure where that 

came from in the order. The FCC did not use a percentage as the 

basis for determining it, but an actual number, a power limit at 

which when you are at the consumer’s home that would be it. 

Northpoint was very comfortable with that. It is the same measurement that is used for determining whether there is interference 

caused by other satellite operators who are sharing the DBS band 

and we think that is an appropriate way to go. 

But again, I would go back to the point that what we are talking 

about is a situation where there has been a substantial amount of 

testing and testing done by the DBS operators themselves. The 

DBS operators themselves could have set up a DBS system in an 

apartment building in Washington when these tests were going on 

to prove that there was harmful interference. They had the opportunity to bring the FCC to that location to demonstrate harmful interference during their own testing, and they were not able to operate the system in a way that it did that. 

Senator SUNUNU. Mr. Wright, last year there was some discussion about merging EchoStar and DirecTV and I think you suggested that that merger was very important, if not essential, to get 

local channels broadcast into all local markets. Does that mean 

that in the absence of the merger the industry is unable to perform 

that important function of getting local access into the local markets? 

Mr. WRIGHT. Senator Sununu, there is no question that localinto-local to all 210 markets is a very serious challenge to the DBS 

industry. As I pointed out in my testimony, when we got this authority in early 2000, we were hopeful that we would be able to 

serve 20 markets. We are already at 70 markets, which will provide service to about 85 percent or about 80 percent. By the end 

of this year we will be at 100 markets. 

EchoStar has already said that, as you said earlier, technology 

marches on. And the industry has expended hundreds of millions 

of dollars, an extreme amount of money, in order to be able to put 

up spot beam satellites to extend the number of markets that we 

can serve. EchoStar is already targeting 150 markets, which would 

be over 90 percent of the population. And today, before the Senate 

36 

Commerce Committee, Rupert Murdoch said that if he is permitted 

to buy DirecTV that it is certainly his intention to do everything 

he can to dramatically increase the 100 markets that DirecTV is 

hoping to serve by the end of this year and that he hopes that he 

can reach 210 markets as soon as it is, I think he said, economically and technologically feasible. 

So yes, I think eventually we will be able to do that. 

Senator SUNUNU. Were you wrong then when you suggested that 

the merger of the two was essential to being able to achieve this 

goal of local-into-local? 

Mr. WRIGHT. Well, Senator, I never said that. But I think what 

was said by the companies as they were attempting to merge is 

that if, if the merger were able to go through, that it would certainly hasten the time, and they made it a commitment to serve 

all 210 markets. I do not think they ever meant that they would 

never be able to do so. 

Senator SUNUNU. Ms. Bush, this local-into-local is obviously a 

perceived value of the terrestrial-based service. Could you speak a 

little bit more broadly about the kind of service that you would intend to offer and what parts of the country it would be ready to 

be deployed in a timely way? 

Ms. BUSH. Thank you, Senator. Northpoint’s technology was in 

fact invented to solve the local signal problem. The inventors of 

Northpoint recognized that DBS was not designed to provide local 

programming to small communities, that that’s not the strength of 

a satellite system, and they designed the system to solve that problem. 

It is our intention, and we have always viewed it as a critical 

part of our business plan, to serve all 210 local television markets 

with their local signals and other locally based community programming. I mean, that is the unique thing about having a system 

that will be built and deployed in each of the 210 television markets, is that it will have the ability to carry unique programming 

for that market, educational programming, programming directed 

to schools and universities, as well as local television signals. 

In addition, that is what will also make our Internet system so 

robust, is that we will be building the system to serve communities 

in each market. So we think that is an important feature, which 

is one of the reasons why we are very pleased to see that the mustcarry rules are part of S. 564. 

Senator SUNUNU. It has been pointed out, and I think rightly so, 

that Northpoint I suppose has been working at this for a number 

of years, and we have gone through that, the delays, but you have 

not deployed a system before. This is something of a new venture 

and with any new venture there are always concerns about utilizing spectrum that might be provided through this piece of legislation or any others. 

Would you support and do you support a firm time limit under 

which the service has to be provided, the spectrum has to be used, 

otherwise it reverts back to the public? 

Ms. BUSH. Yes, we support the shorter buildout requirement that 

is contained in S. 564 of 5 years versus 10 years. In fact, 3 years 

ago Northpoint, testifying in another hearing, committed that we 

37 

would build our system within 2 years of receiving a license, and 

we still stand by that commitment. 

Senator SUNUNU. Finally, back to a question where I was somewhat confused before, Mr. Wright. I was asking not about the existing fees that fund the FCC, but the administration’s proposal to 

change the way that we license spectrum and collect fees for the 

utilization of spectrum on an ongoing basis. You may not be familiar with the budget proposal that was submitted by the President 

at the beginning of this year, but it would effectively allocate much 

more significant fees for the use of license. 

My question was whether you support that proposal to the extent 

that it is applied effectively across all satellite or terrestrial-based 

DBS systems? 

Mr. WRIGHT. Senator Sununu, I must apologize; I am not familiar with that proposal. However, I would say that in a situation— 

I think it has been proven through our experience that in a situation where you have multiple applicants for one piece of spectrum 

that the auction process is a very efficient way to allocate the spectrum. 

If I may, I would also like to respond to something that Ms. Bush 

said just a few moments ago, which is that indeed the Northpoint 

business plan has morphed over the years and shifted pretty dramatically. I think the ultimate refutation of what Northpoint is 

proposing is the fact that their original proposal was to be an adjunct service to DBS, to be able to allow DBS, back before we ever 

imagined that we could do local-into-local, to give us a way to do 

that. 

Believe me, Mr. Sununu, if our engineers had believed that, my 

company’s engineers had believed, that that was possible without 

severe interference, they would have jumped at that opportunity, 

because being able to provide local-into-local is a key for us to be 

able to be truly competitive with cable and it is something that we 

have desired ever since day one and we have worked very hard to 

accomplish. 

Senator SUNUNU. Mr. Hazlett, I am tempted to ask you to carry 

on a little bit about the efficiency of Federal spectrum auctions, 

particularly with regard to the Nextel process, but I do not think 

we quite have enough time. 

Thank you very much, Mr. Chairman. 

Senator BURNS. We have got the building leased for all day. 

[Laughter.] 

Senator BURNS. I have a question for Mr. Roadman. The investment climate has been difficult, to say the least, over the past few 

years since the passage of the LPTV Internet Act. Has progress 

been made since then and are you still hopeful that you will be 

able to offer wireless broadband under the terms of that pilot 

project? 

Mr. ROADMAN. We are. For a number of years the primary mover 

in the LPTV spectrum was able to offer one-way successfully commercially. They were unable to raise funds, but did conduct a oneway test and a one-way commercial operation successfully. 

We have put together the management team and the right mix 

to go forward if we can get financing to finance the test, and we 

38 

believe that we will have that financing in 2003 and should be able 

to complete the test in 2003. 

Senator BURNS. I just wondered how that was coming because we 

have hit some rocky times and capital formation has been pretty 

tough. 

If the pilot project under this Internet Act proves successful, 

could wireless broadband be rolled out across the country over a 

low-power band? 

Mr. ROADMAN. Yes. 

Senator BURNS. It can be done? 

Mr. ROADMAN. Well, there are the existing stations, and we 

would need the help of Congress and the FCC to make the legislation—make it extend past the 13 legislative stations, to do that. 

But that is not a technology question; that is a legislative regulatory question. 

Senator BURNS. I think most of the questions have been asked 

that I wanted to ask, and we have had—I have always loved this 

kind of a give and take at the table because we learn a lot more 

from that. 

Is there anything else you want to explore there, Senator? 

Senator SUNUNU. I simply want to thank the Chairman and the 

panelists. I know this is a fairly complex subject and, as I said in 

my opening, we have got bits of technology and spectrum issues, 

but at the end of the day I feel this is about doing what is right 

for the public and the consumers with regard to access and competition and giving them choices. 

I appreciate you all being here to help shed some light on what 

we can do to either strengthen this bill or get this passed, to make 

a difference for consumers. 

Finally, I would just ask unanimous consent, Mr. Chairman, to 

enter a letter from Consumer’s Union providing their views on S. 

564. 

Senator BURNS. Without objection, it shall be. 

[The information referred to was not available at time of print.] 

Senator SUNUNU. Thank you, Mr. Chairman. 

Senator BURNS. You know, I agree with you on most of that, but 

I will tell you also, I am always cautious. I am cautious that there 

is sometimes, there is unintentional consequences, and we will continue to explore where they may be and be pretty solid in our investigation and we would hope that we would come up with something fair, not only for the industry, too. You have got to take into 

consideration what is good for the industry and good for the consumers because both of them kind of got to grow together because 

they are the ones that provide the jobs and the opportunity at a 

lower price to the consumer, and of course that is a good thing. 

I want to thank each of you for coming here today and sharing 

your thoughts. There will be some questions. Senator—the little 

guy that sat right here—Stevens—happy? We are going to call him 

the Good Humor man from now on—has a couple questions and I 

am sure he will forward those to you and if you could respond to 

him and the Committee that would be terrific, and any other Senator, and we will leave the record open for a couple of weeks. 

Thank you again for coming. These hearings are closed. 

[Whereupon, at 4:12 p.m., the hearing was adjourned.] 

(39) 

A P P E N D I X 

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

Thank you, Chairman Burns, and let me commend you for calling today’s hearing 

to revisit two important issues—the assignment of licenses for Multichannel Video 

Distribution and Data Services (MVDDS), and the use of low power television to 

provide digital data services. Let me begin by welcoming today’s witnesses and, in 

particular, a former staff member of the Committee, Toni Bush, who is here today 

to testify in her current capacity as the Executive Vice President of Northpoint. 

In addition, let me welcome our colleague, Senator Landrieu who is here to give 

some remarks regarding her bill S. 564, The Emergency Communications and Competition Act, of which I am a proud cosponsor. This bill would direct the FCC to 

assign licenses for fixed terrestrial services such as MVDDS without an auction and 

would ensure prompt licensing and deployment of these services. We must remember that not all Americans live in a metropolitan areas. In fact many reside in rural 

and under-served areas such as Hawaii and Montana where there are not an abundance of service providers and where there is not ready access to high-speed data 

services. 

Over the years, we have seen efforts to provide MVDDS spark a firestorm of controversy. DBS providers contend that terrestrial MVDDS that share frequencies can 

cause harmful interference. Would-be MVDDS providers dispute such claims and believe that the sharing of frequencies represents an efficient way to utilize spectrum. 

Yet another question strongly debated is whether these licenses should be subject 

to the FCC spectrum auction process. It is my hope that testimony from today’s witnesses will help us get to the bottom of these disputes. 

I am of the opinion that spectrum can be more efficiently utilized. Since there is 

a finite amount of spectrum available, we should encourage the development and 

deployment of technology that allows us to maximize the natural resources available 

to us. 

I look forward to the testimony today and hope that we give MVDDS technology 

a chance to flourish in the best interests of the American people. 

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

Mr. Chairman, I want to thank you for holding this important hearing today on 

rural wireless broadband. As you know, my home state of Mississippi is a rural 

state, and I am always seeking ways to insure that the people of my state have access to the latest communications technology. I am especially interested in technology which is designed to equalize the options that are available to those people 

who live in urban areas, and those people who live in rural areas. 

When technology has been developed that can provide another competitive option 

for constituents to receive multi-channel video and broadband services, naturally I 

am interested in insuring that this technology is made available in the marketplace. 

Therefore, I was delighted to learn about new technology a few years ago that can 

provide multi-channel video and broadband services on a terrestrial system as another choice for Americans who live in rural areas. I am disappointed that the 

FCC’s review and approval process for the deployment of Multichannel Video Distribution and Data Services—or MVDDS—took so long, and I regret that the Commission chose to auction the necessary licenses to operate this new terrestrial service. 

In order to guarantee the most efficient and productive plan for deploying 

MVDDS technology, I believe that Congress must act. I am happy to join as a cosponsor of S. 564, the Emergency Communications and Competition Act of 2003, because it will speed up the deployment of this new technology and insure that Americans who live in rural areas will have another option for receiving affordable multichannel video and broadband services. An important key component of the bill is 

40 

its requirement that licensees must disseminate Emergency Alert System warnings 

to all subscribers, further insuring the safety of the American public. 

Mr. Chairman, this legislation directs the FCC to assign—rather than auction— 

licenses in the 12.2–12.7 gigahertz band for the operation of fixed terrestrial communications services. In this way, the MVDDS licensees—or Terrestrial Direct 

Broadcast Service licensees as the service is renamed in the bill, would be treated 

in the same way as their Direct Broadcast Satellite competitors who operate in the 

same spectrum band. The bill is fair and thoughtful in requiring that any company 

can compete in the license assignment process which can demonstrate that they 

have the necessary technology and legal rights to deploy such technology, and that 

their technology does not interfere with competing Direct Broadcast Satellite services. 

The public will receive additional benefits from this new multichannel video and 

data service, in that 4 percent of a licensee’s capacity must be utilized for public 

interest offerings such as telemedicine and distance learning. I am pleased that licensees operating in this new Terrestrial Direct Broadcast Service will also be required to comply with all rules governing the carriage of local television station signals, and all indecency and obscenity rules. Finally, the bill insures the speedy deployment of this new service by requiring the FCC to issue licenses to all qualified 

applicants within six months of its enactment, and it requires that authorized licensees build out their systems within five years. 

I am looking forward to hearing the testimony of the witnesses today as we seek 

the most productive approach for deploying Multichannel Video Distribution and 

Data Services technology—which in the bill we are planning to call the Terrestrial 

Direct Broadcast Service. I am also interested in hearing about the progress we are 

making on other fronts as this Subcommittee does everything we can to guarantee 

that Americans who live in rural areas have the same competitive options to utilize 

the latest in wireless broadband technology. 

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