The radio frequency spectrum is the resource that makes possible wireless communication and supports a vast array of commercial and government services. Federal, state, and local agencies use spectrum to fulfill a variety of government missions, such as national defense, air- traffic control, weather forecasting, and public safety. DOD uses spectrum to transmit and receive critical voice and data communications involving military tactical radio, air combat training, precision-guided munitions, unmanned aerial systems, and aeronautical telemetry and satellite control, among others. The military employs these systems for training, testing, and combat operations throughout the world. Commercial entities use spectrum to provide a variety of wireless services, including mobile voice and data, paging, broadcast television and radio, and satellite services. In the United States, responsibility for spectrum management is divided between two agencies: FCC and NTIA. FCC manages spectrum for nonfederal users, including commercial, private, and state and local government users, under the Communications Act. NTIA manages spectrum for federal government users and acts for the President with respect to spectrum management issues as governed by the National Telecommunications and Information Administration Organization Act. FCC and NTIA manage the spectrum through a system of frequency allocation and assignment. Allocation involves segmenting the radio spectrum into bands of frequencies that are designated for use by particular types of radio services or classes of users. (Fig. 1 illustrates examples of allocated spectrum uses, including DOD systems using the 1755-1850 MHz band.) In addition, spectrum managers specify service rules, which include the technical and operating characteristics of equipment. Assignment, which occurs after spectrum has been allocated for particular types of services or classes of users, involves providing users, such as commercial entities or government agencies, with a license or authorization to use a specific portion of spectrum. FCC assigns licenses within frequency bands to commercial enterprises, state and local governments, and other entities. Since 1994, FCC has used competitive bidding, or auctions, to assign certain licenses to commercial entities for their use of spectrum. Auctions are a market- based mechanism in which FCC assigns a license to the entity that submits the highest bids for specific bands of spectrum. NTIA authorizes spectrum use through frequency assignments to federal agencies. More than 60 federal agencies and departments combined have over 240,000 frequency assignments across all spectrum bands, although 9 departments, including DOD, hold 94 percent of all frequency assignments for federal use. Pub. L. No. 103-66, SS 6001,107 Stat. 312 (1993) (OBRA-93) amended by Pub. L. No. 105-33, SS 3002, 111 Stat. 251(1997) (BBA-97), codified as amended at 47 U.S.C. SS 923. enforcement purposes, may not be compatible with commercial technology, and therefore agencies have to work with vendors to develop equipment that meets mission needs and operational requirements. In 2004, the Commercial Spectrum Enhancement Act (CSEA) established a Spectrum Relocation Fund, funded from auction proceeds, to cover the costs incurred by federal entities that relocate to new frequency assignments or transition to alternative technologies. OMB administers the Spectrum Relocation Fund in consultation with NTIA. CSEA streamlined the process by which federal agencies are reimbursed for relocation costs and requires FCC to notify NTIA at least 18 months in advance of beginning an auction of new licenses of spectrum identified for reallocation from federal to nonfederal use. It also requires NTIA to provide estimated cost and transition timing data to FCC, Congress, and GAO at least 6 months prior to the auction, and requires that auctions recover at least 110 percent of these estimated costs. CSEA was amended by the Middle Class Tax Relief and Job Creation Act of 2012, further easing relocation by (1) allowing agencies to use some of the funding for advance planning and system upgrades, (2) extending the reimbursement scheme to sharing as well as relocation expenses, and (3) requiring agencies to submit transition plans for relocation (or sharing) for interagency management review of the costs and timelines associated with the relocation. The auction of spectrum licenses in the 1710-1755 MHz band was the first with relocation costs to take place under CSEA. CSEA designated 1710-1755 MHz as "eligible frequencies" for which federal relocation costs could be paid from the Spectrum Relocation Fund, which is funded Twelve federal agencies by the proceeds from the auction of the band.previously operated communications systems in this band, including DOD. NTIA and FCC jointly reallocated the 1710-1755 MHz band for nonfederal use, and FCC designated the spectrum for Advanced Wireless Services (AWS). In September 2006, FCC concluded the AWS-1 auction of licenses in the 1710-1755 MHz band. In accordance with CSEA, a portion of the auction proceeds associated with the 1710-1755 MHz band is currently being used to pay spectrum relocation expenses. In addition to the 1710-1755 MHz band, the wireless industry has expressed interest in the 1755-1850 MHz band, largely because the band offers excellent radio wave propagation, enabling mobile communication links. The federal government has studied the feasibility of relocating federal agencies from the 1755-1850 MHz band on several occasions. For example, in March 2001, NTIA issued a report examining the potential to accommodate mobile wireless services in the broader 1710- 1850 MHz band. The report was largely based on input from other federal agencies, including a DOD study. NTIA found that unrestricted sharing of the 1755-1850 MHz band was not feasible and that considerable coordination between industry and DOD would be required before any wireless systems could operate alongside federal systems in the band. In August 2001, we also found that more analysis was needed to support spectrum use decisions in the 1755-1850 MHz band, largely because major considerations either were not addressed or were not adequately addressed in DOD's study. These considerations included complete technical and operation analyses of anticipated spectrum interference; cost estimates supporting DOD reimbursement claims; spectrum requirements supporting future military operations; programmatic, budgeting, and schedule decisions needed to guide analyses of alternatives; and potential effects of U.S. reallocation decisions upon international agreements and operations. At the end, a decision was made to reallocate just the 1710-1755 MHz band to minimize the impact on federal capabilities. Activity surrounding the rest of the band (i.e., the 1755-1850 MHz band) did not resurface until October 2010 when NTIA's Fast Track study identified the band for possible reallocation. In June 2010, the administration issued a presidential memorandum titled "Unleashing the Wireless Broadband Revolution" directing NTIA to collaborate with FCC to make a total of 500 MHz of federal and nonfederal spectrum available for wireless broadband within 10 years. Responding to the President's initiative, in October 2010, NTIA published a plan and timetable to make available 500 MHz of spectrum for wireless broadband. This plan and timetable specified that candidate bands would be prioritized for detailed evaluation to determine the feasibility of vacating the bands to accommodate wireless services. In January 2011, NTIA selected the 1755-1850 MHz band as the priority band for detailed evaluation for relocation. DOD and other affected agencies provided NTIA their input on the spectrum feasibility study for the 1755-1850 MHz band, and NTIA subsequently issued its assessment of the viability for accommodating commercial wireless broadband in the band in March 2012. Most recently, the President's Council of Advisors on Science and Technology published a report in July 2012 recommending specific steps to ensure the successful implementation of the President's 2010 memorandum. The report found, for example, that clearing and vacating federal users from certain bands was not a sustainable basis for spectrum policy largely because of the high cost to relocate federal agencies and disruption to federal missions. The report recommended new policies to promote the sharing of federal spectrum. The sharing approach has been questioned by CTIA-The Wireless Association and its members, which argue that cleared spectrum and an exclusive-use approach to spectrum management has enabled the U.S. wireless industry to invest hundreds of billions of dollars to deploy mobile broadband networks resulting in economic benefits for consumers and businesses. Actual costs to relocate communications systems for 12 federal agencies from the 1710-1755 MHz band have exceeded original estimates by about $474 million, or 47 percent, as of March 2013. Table 1 compares estimated relocation costs with the actual costs based on funds transferred to federal agencies in support of the 1710-1755 MHz band relocation effort. OMB and NTIA officials expect the final relocation cost to be about $1.5 billion compared with the original estimate of about $1 billion. In addition, NTIA expects agencies to complete the relocation effort between 2013 and 2017. The original transfers from the Spectrum Relocation Fund to agency accounts were made in March 2007. Subsequently, some agencies requested additional monies from the Spectrum Relocation Fund to cover relocation expenses. Agencies requesting the largest amounts of subsequent transfers include the Department of Justice ($294 million), the Department of Homeland Security ($192 million), and the Department of Energy ($35 million). Total actual costs for the 1710-1755 MHz transition exceeded estimated costs, as reported to Congress in 2007, for many reasons, including: Unforeseen challenges: Agencies encountered various unforeseen challenges when relocating systems out of the 1710-1755 MHz band. For example, according to NTIA officials, one agency needed to upgrade its radio towers to comply with new standards adopted after the towers were built. The agency requested additional monies from the Spectrum Relocation Fund to cover the cost of upgrading its towers, which had not been part of the agency's original relocation estimate. Unique issues posed by specific equipment location: According to NTIA, some federal government communications systems are located in remote areas. One agency requested additional monies from the Spectrum Relocation Fund to use a helicopter to replace a fixed microwave system located on a mountain-top, which exceeded its original cost estimate. Administrative issues associated with transition time frame: NTIA officials told us that some agencies experienced higher than expected labor costs during the transition period, partly to accommodate auction winners' requests to vacate the spectrum as quickly as possible. Costs associated with achieving comparable capability: Some communications systems are unique to federal agencies, making them difficult to upgrade or relocate. In some instances, agencies were using analog radio systems throughout the 1710-1755 MHz band and the digital technology needed to achieve comparable capability was not available prior to vacating the band. When the technology did become available, some agencies found they needed additional funds to procure it, according to OMB officials. For example, we previously reported that the Department of Justice requested funds exceeding its estimate to develop new technology that would operate using the new spectrum and match its current capabilities. Some agencies might not have followed guidance: Some agencies may not have properly followed OMB and NTIA guidance in preparing their original cost estimates. For instance, Immigration and Customs Enforcement (ICE) did not detail its estimated costs by equipment, location, systems, or frequency as suggested by NTIA's guidance. Instead, the agency provided a lump sum estimate for its spectrum relocation costs. We previously reported that ICE officials did not identify a significant number of relocation expenses in the agency's original transfer request, including costs associated with additional equipment, offices, and systems, among other items. Moreover, according to OMB staff, the agency's initial estimate was based on an inadequate inventory of deployed systems. To date, the Department of the Navy has initiated the process to return about $65 million to the Spectrum Relocation Fund, as its relocation costs may end up being less than expected. The Department of the Navy is still in the process of finalizing relocation of its systems, and the exact amount of any money that may be returned will not be known until the relocation is complete. re-tune fixed microwave systems from the 1710-1755 MHz band into the adjacent 1755-1850 MHz band, and it assumed exclusion zones-- geographic areas where commercial licensees could not operate--around 16 DOD sites to prevent interference from commercial users. DOD also estimated a cost of an additional $100 million if precision guided munitions operations needed to be relocated from the 1755-1850 MHz band. Subsequently, in 2001, NTIA reported additional cost estimates reflecting several other options under consideration. One option, which was not evaluated by DOD, included a preliminary cost figure of $1.6 billion. This estimate was based on eliminating some of the 16 exclusion zones around DOD sites and, therefore, relocating additional systems that were not included in the original estimate of $38-138 million, according to NTIA. In December 2006, NTIA reported that DOD's estimate to relocate systems would be about $355.4 million. This estimate reflected a new set of assumptions, such as maintaining exclusion zones at 2 of the 16 DOD sites and relocating fixed microwave systems to the 1755-1850 MHz portion of the band or to other federal bands. Both NTIA and OMB are taking steps to ensure that agencies improve their cost estimates for a future relocation from the 1755-1850 MHz band. For example, according to NTIA and OMB officials, the agencies prepared a cost estimation template and guidelines for reimbursable costs as part of the process to estimate relocation costs for the 1755- 1850 MHz band. The Middle Class Tax Relief and Job Creation Act of 2012 expanded the types of costs for which federal agencies can receive payments from the Spectrum Relocation Fund. The act permits agencies to receive funds for costs associated with planning for FCC auctions and studies or analyses conducted in connection with relocation or sharing of spectrum, including coordination with auction winners. In November 2012, OMB issued guidance to federal agencies to clarify allowable pre- auction costs and other requirements that are eligible to receive payments from the Spectrum Relocation Fund.stated that they are optimistic that by providing pre-auction planning funds to agencies, future cost estimates will improve. The Advanced Wireless Services auction of the 1710-1755 MHz band raised almost $6.9 billion in gross winning bids from the sale of licenses to use these frequencies.actual relocation costs suggests that the auction of the 1710-1755 MHz band raised $5.4 billion for the U.S. Treasury. This number reflects the difference between the $6.9 billion auction revenue and the approximately $1.5 billion estimated final federal relocation cost. As mentioned above, NTIA reports that it expects agencies to complete the relocation effort between 2013 and 2017; therefore the final net revenue amount may change. For example, some agencies have returned or plan to return excess relocation funds to the Spectrum Relocation Fund. To prepare the preliminary cost estimate portion of its study to determine the feasibility of relocating DOD's 11 major radio systems from the 1755- 1850 MHz band, DOD officials said the agency implemented the following methodology: DOD's Cost Assessment and Program Evaluation (CAPE) groupthe effort and provided guidance to management at the respective military services regarding the data needed to support each system's relocation cost estimate and how they should be gathered to maintain consistency across the services. The guidance used by CAPE was based on guidance and assumptions provided by NTIA. Certified cost estimators at each of the services' Cost Centers worked closely with the various program offices to collect the necessary technical and cost data. The cost estimators compiled and reviewed the program data, identified the appropriate program content affected by each system's relocation, developed cost estimates under the given constraints and assumptions, and internally reviewed the estimates consistent with their standard practices before providing them to CAPE to include in the overall estimate. CAPE staff reviewed the services' estimates to ensure they adhered to the provided guidelines for accuracy and consistency, and obtained DOD management approval on its practices and findings. According to DOD officials, CAPE based this methodology on the cost estimation best practices it customarily employs, revising those practices to suit the study requirements as outlined by NTIA. We reviewed DOD's preliminary cost estimation methodology and evaluated it against GAO's Cost Estimating and Assessment Guide (Cost Guide), which also identifies cost estimating best practices, including those used throughout the federal government and industry. The best practices identified in the Cost Guide help ensure that cost estimates are comprehensive, well-documented, accurate, and credible. These characteristics of cost estimates help minimize the risk of cost overruns, missed deadlines, and unmet performance targets: A comprehensive cost estimate ensures that costs are neither omitted nor double counted. A well-documented estimate is thoroughly documented, including source data and significance, clearly detailed calculations and results, and explanations for choosing a particular method or reference. An accurate cost estimate is unbiased, not overly conservative or overly optimistic, and based on an assessment of most likely costs. A credible estimate discusses any limitations of the analysis from uncertainty or biases surrounding data or assumptions. When applying GAO's identified best practices to DOD's methodology, we took into account that DOD officials developed the preliminary cost estimate for relocation as a less rigorous, "rough order of magnitude" cost estimate, not a budget-quality cost estimate. The nature of a rough- order-of-magnitude estimate means that it is not as robust as a detailed, budget quality life-cycle estimate and its results should not be considered or used with the same level of confidence. Because of this, we performed a high-level analysis of DOD's preliminary cost estimate and methodology, and did not review all supporting data and analysis. When we reviewed DOD's preliminary cost estimation methodology and evaluated it against the Cost Guide's best practices, we found that DOD's methodology substantially met the comprehensive and well-documented characteristics of reliable cost estimates, and partially met the accurate and credible characteristics, as shown in table 2. Overall, we found that DOD's cost estimate was consistent with the purpose of the feasibility study, which was to inform the decision making process to reallocate 500 MHz of spectrum for commercial wireless broadband use. Additionally, we found that DOD's preliminary cost- estimation methodology substantially met both the comprehensive and well-documented characteristics. As noted in the table above, we observed that DOD's estimate included complete information about systems' life cycles and was generally well-documented. However, these characteristics were not fully met because we found that information on the tasks required to relocate some systems was incomplete, and that documentation for some programs was not sufficient to support a rough- order-of-magnitude estimate. We also determined that DOD's preliminary cost-estimation methodology partially met the accurate and credible characteristics. We found that DOD properly applied appropriate inflation rates and made no apparent calculation errors, and that the estimated costs agree with DOD's prior relocation cost estimate for this band conducted in 2001. However, DOD did not fully or substantially meet the accurate and credible characteristics because it was not clear if the estimate considered the most likely costs and because some sensitivity analyses and risk assessments were only completed at the program level for some programs, and not at all at the summary level. Even though DOD's preliminary cost estimate substantially met some of our best practices, as the assumptions supporting the estimate change over time, costs may also change. According to DOD officials, any change to key assumptions about the bands to which systems would move and the relocation start date could substantially change relocation costs. Because decisions about the spectrum bands to which the various systems would be reassigned and the time frame for relocation have not been made yet, DOD based its current estimate on the most likely assumptions, provided by NTIA, some of which have already been proven inaccurate or are still undetermined. For example: Relocation bands: Decisions about which comparable or alternate spectrum bands federal agencies, including DOD, should relocate to are still unresolved. According to DOD officials, equipment relocation costs vary significantly depending on the relocation band's proximity to the current band. Moving to bands further away than the assumed relocation bands could increase costs relative to moving to closer bands with similar technical characteristics. In addition, congestion, in both the 1755-1850 MHz band and some of the potential alternate spectrum bands to which federal systems might be moved, complicates relocation planning. According to DOD officials, many of the federal radio systems relocated from the 1710-1755 MHz band were simply re-tuned or compressed into the 1755-1850 MHz band, adding to the complexity of systems and equipment requiring relocation from this band since 2001. Also, DOD officials said that some of the potential spectrum bands to which DOD's systems could be relocated are themselves either already congested or the systems are incompatible unless other actions are also taken. For example, cost estimates for several of DOD's systems assumed that these systems would be relocated into the 2025-2110 MHz band, and operate within this band on a primary basis. However, this band is currently allocated to commercial electronic news gathering systems and other commercial and federal systems, and while the band is not currently congested, it does not support compatible coexistence between DOD systems and commercial electronic news gathering systems. To accommodate military systems within this band, FCC would need to withdraw this spectrum from commercial use to allow NTIA to provide DOD primary status within this band, or FCC would have to otherwise ensure that commercial systems operate on a non- interference basis with military systems. FCC has not initiated a rulemaking procedure to begin such processes. Relocation start date: DOD's cost estimate assumed relocation would begin in fiscal year 2013, but no auction has been approved, so relocation efforts have not begun. According to DOD officials, a change in the start date creates uncertainty in the cost estimate because new equipment and systems continue to be deployed in and designed for this band, and older systems are retired. This changes the overall profile of systems in the band, a change that can alter the costs of relocation. For example, a major driver of the cost increase between DOD's 2001 and 2011 relocation estimates for the 1755- 1850 MHz band was the large increase in the use of the band, including unmanned aerial systems. DOD deployed these systems very little in 2001, but their numbers had increased substantially by 2011. Conversely, equipment near the end of its life cycle when DOD's 2011 relocation cost estimate was completed may be retired or replaced outside of relocation efforts, which could decrease relocation costs. Inflation: DOD appropriately used 2012 inflation figures in its estimate, assuming that relocation would begin in fiscal year 2013. As more time elapses before the auction occurs, the effect of inflation will increase the relocation costs each year. According to DOD, the preliminary cost estimate is not as robust as a detailed, budget-quality lifecycle estimate. A budget-quality estimate is based on more fully formed assumptions for specific programs. DOD officials said that for a spectrum relocation effort, a detailed, budget- quality cost estimate would normally be done during the transition- planning phase once a spectrum auction has been approved and would be based on the requirements for the specific auction and relocation decisions. No official government revenue forecast has been prepared for a potential auction of 1755-1850 MHz band licenses, but some estimates might be prepared once there is a greater likelihood of an auction. Officials we spoke with at CBO, FCC, NTIA, and OMB confirmed that none of these agencies has produced a revenue forecast thus far. Officials at these agencies knowledgeable about estimating spectrum-license auction revenue said that because the value of licensed spectrum varies greatly over time and the information on factors that might influence the spectrum auction revenues is not yet available, it is too early to produce meaningful forecasts for a potential auction of the 1755-1850 MHz band. Moreover, CBO only provides written estimates of potential receipts when a congressional committee reports legislation invoking FCC auctions. OMB would estimate receipts and relocation costs as part of the President's Budget; OMB analysts would use relocation cost information from NTIA to complete OMB's estimate of receipts. The potential for large differences between CBO and OMB forecasts exist, as well. For example, in the past, CBO and OMB have produced very different estimates of potential FCC auction receipts at approximately the same time with access to the same data, underscoring how differing assumptions can lead to different results. Although no official government revenue forecast exists, an economist with the Brattle Group, an economic consulting firm, published a revenue forecast in 2011 for a potential auction of the 1755-1850 MHz band that We did not evaluate forecasted revenues of $19.4 billion for the band. the accuracy of this revenue estimate. Like all forecasts, the Brattle Group study was based on certain assumptions. For example, it assumed that the band would generally be cleared of federal users. It also assumed the AWS-1 average nationwide price of $1.03 per "MHz-pop" as a baseline price for spectrum allocated to wireless broadband services.In addition, the study adjusts the price of spectrum based on the following considerations: Increase in the quantity of spectrum using elasticity of demand. As the supply of spectrum for commercial wireless broadband services increases, the price and value of spectrum is expected to fall. The elasticity of demand is used to make adjustments for the increased supply of spectrum. Differences in capacity and quality of spectrum using value weights. According to the study, wireless broadband spectrum is generally thought to have a price elasticity of around -1.2, which implies that a 1 percent increase in the base supply of spectrum should result in a 1.2 percent decrease in its price. because traditional, two-way communications, such as mobile phone services, are typically provided over paired bands of spectrum. Similarly, a greater value weight is given to bands of spectrum with no restrictions on use, or encumbrances. Fewer restrictions would increase the capacity or the types of services for a given spectrum band. The study also assumes that the 1755-1780 MHz portion of the band is paired with the 2155-2180 MHz band, which various industry stakeholders currently support. For spectrum services that require two- way communications, pairing bands allows them to be used more efficiently by diminishing interference from incompatible adjacent operations. In addition, the study assumed the 95 MHz of spectrum between 1755 and 1850 MHz would be auctioned as part of a total of 470 MHz of spectrum included in six auctions sequenced 18 months apart and spread over 9 years with total net receipts of $64 billion. Thus, the forecast also took into account when the spectrum would be reallocated for commercial services. Like all goods, the price of licensed spectrum, and ultimately the auction revenue, is determined by supply and demand. This fundamental economic concept helps to explain how the price of licensed spectrum could change depending on how much spectrum is available now and in the future, and how much licensed spectrum is demanded by the wireless industry for broadband applications. Government agencies can influence the supply of spectrum available for licensing and the characteristics of those licenses, whereas expectations about profitability determine demand for spectrum in the marketplace. Supply. FCC and NTIA, with direction from Congress and the President, jointly influence the amount of spectrum allocated for federal and nonfederal users, including the amount to be shared by federal and nonfederal users. In 2010, the President directed NTIA to work with FCC to make 500 MHz of spectrum available for use by commercial broadband services within 10 years. This represents a significant increase in the supply of spectrum available for licensing in the marketplace. As with all economic goods, with all other things being equal, the price and value of spectrum licenses are expected to fall as additional supply is introduced. However, at this time, the answers to key questions about the reallocation of the 1755-1850 MHz band are unknown. Expectations about exactly how much spectrum is available for licensing now and how much will be available in the future would influence how much wireless companies would be willing to pay for spectrum licensed today. Demand. The expected, potential profitability of a spectrum license influences the level of demand for it. As with all assets, companies base their capital investment decisions on the expected net return, or profit, over time of their use. The same holds true for spectrum. Currently, the demand for licensed spectrum is increasing, and a primary driver of this increased demand is the significant growth in the use of commercial- wireless broadband services, including third and fourth generation technologies that are increasingly used for smart phones and tablet computers. Below are some of the factors that would influence the demand for licensed spectrum: Clearing versus Sharing: Spectrum is more valuable, and companies will pay more to license it, if it is entirely cleared of incumbent federal users, giving them sole use of licensed spectrum; spectrum licenses are less valuable if access must be shared. Sharing could potentially have a big impact on the price of spectrum licenses, especially if a sharing agreement does not guarantee service when the licensee would need it most. For example, knowing in advance that service would be unavailable once a month at 3 a.m. may not significantly influence price, but if the times when the service will be unavailable are unknown, the effect on price could be significant. In 2012, the President's Council of Advisors on Science and Technology advocated that sharing between federal and commercial users become the new norm for spectrum management, especially given the high cost and lengthy time it takes to relocate federal users and the disruptions to agencies' missions. Certainty and Timing: Another factor that affects the value of licensed spectrum is the certainty about when it becomes available. Seven years after the auction of the 1710-1755 MHz band, federal agencies are still relocating systems. According to an economist with whom we met, one lesson from the 1710-1755 MHz relocation effort is that uncertainty about the time frame for availability reduces the value of the spectrum. Any increase in the probability that the spectrum would not be cleared on time would have a negative impact on the price companies are willing to pay to use it. As such, the estimated 10-year timeframe to clear federal users from the entire 1755-1850 MHz band, and potential uncertainty around that time frame, could negatively influence demand for the spectrum. The 2012 amendments to the CSEA include changes designed to reduce this uncertainty by requiring federal agencies that will be relocating (or sharing spectrum) to submit transition plans with timelines for specific geographic locations, with interagency review of those plans aimed at ensuring timely relocation (or sharing) arrangements. Available Wireless Services: Innovation in the wireless broadband market is expected to continue to drive demand for wireless services. For example, demand continues to increase for smart phones and tablets as new services are introduced in the marketplace. These devices can connect to the Internet through regular cellular service using commercial spectrum, or they can use publicly available (unlicensed) spectrum via Wi-Fi networks to access the Internet. The value of the spectrum, therefore, is determined by continued strong development of and demand for wireless services and devices, and the profits that can be realized from them. We provided a draft of this report to the Department of Commerce (Commerce), DOD, FCC, and OMB for review and comment. FCC agreed with the report's findings, and Commerce, DOD, and FCC provided technical comments that we incorporated as appropriate. FCC's written comments appear in appendix II. OMB did not provide comments. We are sending copies of this report to the Secretary of Commerce, the Secretary of Defense, the Chairman of the Federal Communications Commission, the Director of the Office of Management and Budget, and the appropriate congressional committees. In addition, the report will be available at no charge on GAO's website at http://www.gao.gov. If you or members of your staff have any questions about this report, please contact me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Major contributors to this report are listed in appendix III. The objectives of this report were to examine (1) the differences, if any, between estimated and actual federal relocation costs and auction revenues from the 1710-1755 MHz band; (2) the extent to which the Department of Defense (DOD) followed best practices to prepare its preliminary cost estimate for vacating the 1755-1850 MHz band, and any limitations of its analysis; and (3) what government or industry revenue forecasts for the 1755-1850 MHz band auction exist, if any, and what factors, if any, could influence actual auction revenue. To examine the differences, if any, between estimated and actual federal relocation costs and auction revenues from the 1710-1755 MHz band, we reviewed spectrum auction data published by the Federal Communications Commission (FCC) and federal relocation cost data from the National Telecommunication and Information Administration's (NTIA) annual 1710-1755 MHz band relocation progress reports, published yearly since 2008. We narrowed our review of past spectrum auctions to the 1710-1755 MHz relocation after reviewing FCC auction data and NTIA reports describing other spectrum relocations and auctions involving federal agencies, and interviews with knowledgeable FCC, NTIA, Office of Management and Budget (OMB), and Congressional Budget Office (CBO) officials. The Advanced Wireless Services-1 (AWS- 1) auction involving the 1710-1755 MHz band is the only spectrum auction involving federal agencies with significant, known relocation costs. In addition, it is the only relocation involving DOD radio communication systems. To assess the reliability of FCC auction and NTIA relocation cost data, we reviewed documentation related to the data; compared it to other sources, including other government reports; and discussed the data with FCC and NTIA officials. We did not evaluate the accuracy of individual agencies' relocation cost data, as this was outside the scope of our review. Based on this review, we determined that the FCC and NTIA data were sufficiently reliable for the purposes of our report. To determine the extent to which DOD followed best practices to prepare its preliminary cost estimate for vacating the 1755-1850 MHz band, we assessed DOD's preliminary cost estimate against the best practices in GAO's Cost Estimating and Assessment Guide (Cost Guide), which has been used to evaluate cost estimates across the government. These best practices help ensure cost estimates compiled at different stages in the cost estimating process are comprehensive, well-documented accurate, and credible. To develop our assessment, we interviewed DOD officials, including in the agency's Cost Assessment and Program Evaluation (CAPE) group that led the cost estimation effort, regarding their data collection and cost estimation methodologies and the findings reported in DOD's feasibility study. We also reviewed electronic source documentation supporting the estimate with a CAPE official. After completing this review, a GAO cost analyst developed an assessment using our 5-point scale (not met, minimally met, partially met, substantially met, and met) and a second analyst verified the assessment. DOD's preliminary cost estimate was a rough-order-of-magnitude estimate; consequently, it did not contain all the information expected of a complete, budget-quality cost estimate. Therefore, we performed a high- level analysis to determine whether DOD's reported estimated costs considered all the potential factors that could influence those relocation costs. To identify any limitations affecting DOD's estimate, we interviewed DOD officials responsible for developing the department's preliminary cost estimate. We also interviewed NTIA and OMB officials knowledgeable about the intended purpose of the estimate to discuss how the estimate should be used and any factors that would affect the reliability of the estimate. Bazelon, Expected Receipts From Proposed Spectrum Auctions (July 2011). the sale of spectrum licenses, and (3) relocation costs. We discussed factors affecting spectrum auction revenue with CBO and OMB officials, industry and policy experts, and obtained input from CTIA--The Wireless Association, the association representing the wireless industry. We conducted this performance audit from September 2012 to May 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient appropriate evidence and provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the contact named above, Michael Clements, Assistant Director; Stephen Brown; Jonathan Carver; Leia Dickerson; Jennifer Echard; Emile Ettedgui; Colin Fallon; Bert Japikse; Elke Kolodinski; Joshua Ormond; Jay Tallon; and Elizabeth Wood made key contributions to this report.

Summary:
Allocating radio-frequency spectrum is a challenging task because of competing commercial and government demands. In 2006, FCC auctioned spectrum licenses in the 1710-1755 MHz band that had previously been allocated for federal use. To meet the continued demand for commercial wireless services, NTIA assessed the viability of reallocating the 1755-1850 MHz band to commercial use; this band is currently assigned to more than 20 federal users, including DOD. In March 2012, NTIA reported that it would cost $18 billion over 10 years to relocate most federal operations from the band, raising questions about whether relocating federal users is a sustainable approach. GAO was directed to review the costs to relocate federal spectrum users and revenues from spectrum auctions. This report addresses (1) estimated and actual relocation costs, and revenue from the previously auctioned 1710-1755 MHz band; (2) the extent to which DOD followed best practices to prepare its preliminary cost estimate for vacating the 1755-1850 MHz band; and (3) existing government or industry forecasts for revenue from an auction of the 1755-1850 MHz band. GAO reviewed relevant reports; interviewed DOD, FCC, NTIA, and OMB officials and industry stakeholders; and analyzed the extent to which DOD's preliminary cost estimate met best practices as identified in GAO's Cost Estimating and Assessment Guide (Cost Guide). FCC agreed with the report's findings and DOD, FCC, and NTIA provided technical comments that were incorporated as appropriate. Some federal agencies underestimated the costs to relocate communication systems from the 1710-1755 megahertz (MHz) band, although auction revenues appear to exceed relocation costs by over $5 billion. As of March 2013, actual relocation costs have exceeded estimated costs by about $474 million, or 47 percent. The National Telecommunications and Information Administration (NTIA) expects agencies to complete the relocation effort between 2013 and 2017, with a final relocation cost of about $1.5 billion. Actual relocation costs have exceeded estimated costs for various reasons, including unforeseen challenges and some agencies not following NTIA's guidance for developing cost estimates. However, the Department of Defense (DOD) expects to complete its relocation for about $71 million less than its estimate of about $355 million. NTIA and the Office of Management and Budget (OMB) are taking steps to ensure that agencies improve their cost estimates by, for example, preparing a cost estimation template and guidelines for reporting reimbursable costs. The auction of spectrum licenses in the 1710-1755 MHz band raised almost $6.9 billion. DOD's preliminary cost estimate for relocating systems out of the 1755-1850 MHz band substantially or partially met GAO's best practices for cost estimates, but changes in key assumptions may affect future costs. Adherence with GAO's Cost Guide reduces the risk of cost overruns and missed deadlines. GAO found that DOD's preliminary estimate of $12.6 billion substantially met the comprehensive and well-documented best practices. For instance, it included complete information about systems' life cycles, and the baseline data were consistent with the estimate. However, GAO found that some information on the tasks required to relocate some systems was incomplete. GAO also determined that DOD's estimate partially met the accurate and credible best practices. For example, DOD applied appropriate inflation rates and made no apparent calculation errors. However, DOD did not complete some sensitivity analyses and risk assessments at the program level, and not at all at the summary level. DOD officials said that changes to key assumptions could substantially change relocation costs. Most importantly, decisions about which spectrum band DOD would relocate to are still unresolved, and relocation costs vary depending on the proximity to the 1755-1850 MHz band. Nevertheless, DOD's preliminary cost estimate was consistent with its purpose--informing the decision-making process to make additional spectrum available for commercial wireless services. No government revenue forecast has been prepared for a potential auction of the 1755-1850 MHz band, and a variety of factors could influence auction revenues. One private sector study in 2011 forecasted $19.4 billion in auction revenue for the band, assuming that federal users would be cleared and the nationwide spectrum price from a previous auction, adjusted for inflation, would apply to this spectrum. Like for all goods, the price of spectrum, and ultimately the auction revenue, is determined by supply and demand. The Federal Communications Commission (FCC) and NTIA jointly influence the amount of spectrum allocated to federal and nonfederal users (the supply). The potential profitability of a spectrum license influences its demand. Several factors would influence profitability and demand, including whether the spectrum is cleared of federal users or must be shared.