Radio frequency spectrum is used for all forms of wireless communications, including cellular telephony, paging, personal communications service, radio and television broadcast, telephone radio relay, aeronautical and maritime radio navigation, and satellite command and control. Spectrum policy covers both satellite and terrestrial transmissions. The issues discussed here refer principally to spectrum management for terrestrial technologies. Radio frequency spectrum is managed primarily by regulations that set rules, for example, for permissible uses, certification of devices, requirements for public safety, and the acquisition of licenses. Spectrum is assigned primarily through licenses while some spectrum remains unlicensed and accessible to any user who meets specific requirements. The Federal Communications Commission (FCC) is responsible for overseeing licensed and unlicensed spectrum used for commercial purposes and by state and local agencies, including first responders, as well as most other radio frequencies not assigned for federal use. Although Congress has a legislative role in spectrum management, the FCC routinely takes on the responsibility of making decisions about the assignment of spectrum for different uses and sets the rules for auctions of spectrum licenses. Two recent important auctions of spectrum licenses were for the 700 MHz band, Auction 73, and the Advanced Wireless Services (AWS), designated Auction 66 or AWS-1. The auction for licenses at 700 MHzâairwaves that are or will be available because of the planned switch from analog to digital television broadcastingâended March 18, 2008. The bids in this auction totaled over $19.5 billion. AWS-1 was completed on September 18, 2006, with nearly $13.9 billion in completed bids. Spectrum is considered to be a natural resource with a combination of characteristics that differentiate it from other resources. For example, spectrum is: Finite . Today's technology can only operate on certain frequencies; commercially viable frequencies are a valuable commodity. Renewable . Airwaves used to broadcast any transmission can be reused after the broadcast is completed. Technology dependent . Most natural resources can be harvested manually, albeit inefficiently. Spectrum is in the atmosphere and is usable because technology has been developed to exploit the properties of electromagnetic waves for sound, data and video transmission. A national asset with international rules and regulations . For example, most domestic uses of spectrum are assigned bands of operation through the International Telecommunications Union, an agency of the United Nations; satellites for broadcasting are governed by international treaty. Administered . To avoid interference from competing broadcast transmissions, frequency assignments are managed by recognized authorities. Administrative decisions as to how to allocate spectrum (for example, the number of channels to assign with a license) influence its commercial potential and the supply of spectrum for commercial and public use. The development and implementation of better wireless communications technologies are critical to maximizing the efficiency of spectrum resources. Spectrum management policies ideally should take into account the impact of new technology, orâsince it is difficult to predict the development paths of new technologiesâallow for flexibility and accommodation in spectrum allocation. Although flexibility may be desirable in policy-making, most existing wireless technologies are inflexibly constructed to work on a limited range of specific frequencies. Relocation from one part of the spectrum to another can require costly equipment changes. Therefore, reallocation of spectrum to new uses is often expensive as well as technically and administratively difficult. Additionally, some uses of spectrum are governed by international regulations. Because two or more signal transmissions over the same frequency in the same location at the same time could cause interference (a distortion of the signals), the FCC, over many years, has developed and refined a system of exclusive licenses for users of specific frequencies. In the recent past, the FCC has granted licenses using a process known as "comparative hearings"(also known as "beauty contests"), and has used lotteries to distribute spectrum licenses. After years of debate over the idea of using competitive bidding (i.e., auctions) to assign spectrum licenses, the Omnibus Budget Reconciliation Act of 1993 ( P.L. 103-66 ) added Section 309(j) to the Communications Act, authorizing the FCC to organize auctions to award spectrum licenses for certain wireless communications services. Additional provisions concerning auctions were included in the Balanced Budget Act of 1997, the Auction Reform Act of 2002, the Commercial Spectrum Enhancement Act, and the Deficit Reduction Act of 2005âall discussed below. The main category of services for which licenses may be auctioned are called Commercial Mobile Radio Services (CMRS), which include Advanced Wireless Services (AWS), Personal Communications Service (PCS), cellular, and most Specialized Mobile Radio Services (SMR) With some exceptions, CMRS providers are regulated as common carriers to ensure regulatory parity among similar services that will compete against one another for subscribers. Spectrum policy to manage frequency allocation and license assignments has evolved over the years in response to changes in technology and market demand, among other factors. Auctions are a market-driven solution to assigning licenses to use specific frequencies and are a recent innovation in spectrum management and policy. Spectrum for what is widely described as "prime" frequencies (300 MHz -3000 MHz) is judged by many to be the most commercially desirable and is widely sought after at auction by competing interests. Several lucrative auctions have added billions to the federal treasury, applied to general revenue. The FCC has the authority to conduct auctions only when applications are mutually exclusive (i.e., two licensees in the same frequency band would be unable to operate without causing interference with each other), and when services are primarily subscription-based. The FCC does not have authority to reclaim licenses awarded prior to the decision to permit auctions. In accordance with the Budget Enforcement Act of 1990, and provisions in the Communications Act of 1934, as amended, auction proceeds cannot be used for funding other programs. Creation of two important trust fundsâthe Spectrum Relocation Fund and the Digital Television and Public Safety Fundârequired new language and amendments to existing law to permit some auction revenues to be applied directly to specific programs through trusts. The Communications Act of 1934, as amended, directs the FCC to develop a competitive bidding methodology. The FCC initially developed rules for each auction separately (with some common elements), but after several years of trial and error it has developed a set of general auction rules and procedures. While there may be special requirements for specific auctions, the following rules generally apply. As a screening mechanism, all auctions require bidders to submit applications and up-front payments prior to the auction. Most auctions are conducted in simultaneous multiple-round bidding in which the FCC accepts bids on a large set of related licenses simultaneously, using electronic communications. Bidders can bid in consecutive rounds until all bidding has stopped on all licenses. The rules the FCC sets for each auction cover many activities, such as evaluating and qualifying bidders, the bidding process, and final payment. Recent FCC decisions about auction rules that are currently controversial include setting new requirements for designated entities and using blind bidding. In some auctions, the FCC has given concessions to small businesses that include bidding credits and set-asides of licenses. These small companies are typically classed as entrepreneurs or small businesses. Entrepreneurs are defined as having annual gross revenues of less than $125 million and total assets of less than $500 million. Qualification as a small business includes annual revenues of no more than $40 million, averaged over three years. The FCC originally also gave special provisions to women-owned, minority-owned, and rural telephone companies, referred to as designated entities. After a 1995 Supreme Court decision determined that government affirmative action policies must pass a "strict scrutiny" test to demonstrate past discrimination, the FCC removed minority-owned and women-owned groups from its list of businesses qualifying for bidding credits as designated entities. Many industry observers have expressed concern that some of the small businesses participating in auctions actually represent larger companies. By contracting with a larger company, some companies that bid as a designated entity or entrepreneur are alleged to have benefitted from bidding credits and other considerations granted to smaller companies while tapping the financial resources of a major wireless telecommunications company. Furthermore, a study by the Congressional Budget Office (CBO) found that a significant number of small companies that acquired spectrum licenses through preferential programs later transferred the licenses to larger companies. To avoid providing an undue advantage to designated entities, the FCC modified auction rules for the first Advanced Wireless Services auction, held in 2006. Notably, the FCC adopted rules to limit the transfer of designated entity benefits to any applicant or licensee with an "impermissible material relationship." The FCC also sought to curtail "unjust enrichment payments," by requiring that designated entities hold spectrum acquired in the AWS-1 auction for at least ten years; the rule previously set a time period of five years. The FCC found that rule modifications such as these were "necessary to ensure that every recipient of the FCC's designated entity benefits is an entity that uses its licenses to directly provide facilities-based telecommunications services for the benefit of the public." Prospective bidders must meet eligibility requirements that include identifying the licenses they seek to acquire through the auction. These bidders are identified by name throughout the bidding process. Some experts in structuring spectrum auctions have proposed blind bidding so that opponents for contested licenses will not be able to identify the competitor. They argue that blind bidding would prevent collusion, for example between incumbents to keep out a new entrant, retaliatory bidding, and other practices that may skew auction results. Blind bidding was proposed during the comments period leading up to the AWS-1 auction but met resistance from the wireless industry, on the grounds that there were sufficient prospective bidders to assure competition. Media Access Project published two studies on the AWS-1 auction alleging evidence of collusive bidding and other practices that enabled incumbent wireless companies to exclude new entrants and possibly manipulate the process so that final bids were lower than might have been the case if the auction had been truly competitive.