Majority Statement

• Senator John D. (Jay) Rockefeller IV

  Chairman

  U.S. Senate Committee on Commerce, Science, and Transportation
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  Majority Statement

  Senator John D. (Jay) Rockefeller IV

  Almost two years ago, I authored legislation with Kay Bailey Hutchison to give the FCC a new tool, voluntary incentive auctions, to make sure the nation’s limited spectrum resources are used smartly. Our legislation reflected widespread agreement from both sides of the aisle that we must continue to lead the way with innovative spectrum policies that generate real benefits for all Americans and help strengthen the United States’ global leadership in mobile broadband.

  Critical to that bipartisan legislation was the directive that those incentive auctions would, in turn, provide an important means to help fund a pressing national need – creation of a nationwide, interoperable wireless broadband network for our first responders, FirstNet.  

  There is no doubt that the FCC’s incentive auction proceeding is one of the most important undertakings in the agency’s history. That is why we are here today. To hear from the FCC and from various stakeholders as to how we can make sure that the upcoming incentive auction is a success.  

  There is too much at stake to be complacent:

  • A successful incentive auction will set a new model for international spectrum policy, just as we did 20 years ago with the first spectrum auctions. It also will pave the way for future incentive auctions in the United States.

  • A successful incentive auction will mean more robust wireless communications networks both for voice and data in rural and urban areas around the country. It will make sure the United States continues its global leadership in wireless and preserves room for the innovation brought about by unlicensed spectrum use.

  • A successful incentive auction will offer broadcasters an opportunity to relinquish some or all of their current spectrum usage rights for an incentive payment.

  • A successful incentive auction will minimize disruptions and expense to those broadcasters who choose to remain in the business.

  • Finally, a successful incentive auction will raise significant revenue for FirstNet. As I have said before, this auction must be driven by one simple principle -- it must raise the resources needed for the FirstNet network.

  This is a complicated proceeding that affects whole industries. As Congress has always done, we deferred the intricacies of auction design and development to the expert agency. Having generated approximately $50 billion for the U.S. Treasury and awarded tens of thousands of licenses through spectrum auctions, the FCC is the undisputed expert on spectrum actions.  

  The FCC also must be afforded the flexibility necessary to make sure that all of the tools it uses as part of the auction are as accurate as possible.

  FCC Chairman Tom Wheeler has analogized the challenging and interlocking nature of the various parts of the incentive auction to a type of Rubik’s cube. That is apt. Getting these auctions right and making them simple enough to encourage sufficient broadcaster participation will be an incredibly complex process. But I know that Chairman Wheeler understands better than anyone that, unlike a Rubik’s cube, this auction is no game. By his own account, he has spent more time on the incentive auction than any other issue in his first month as chair of the agency.

  Given the stakes, I look forward to a constructive dialogue from the witnesses today about their perspectives on how the FCC can craft a successful incentive auction. Thank you.

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Minority Statement

• Senator John R Thune

  Ranking Member

  U.S. Senate Committee on Commerce, Science, and Transportation
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  Minority Statement

  Senator John R Thune

  Thank you, Mr. Chairman, for holding this hearing. And, thank you to our witnesses for being with us today.

  American consumers are hungry for more mobile connectivity. The innovation economy is being driven by mobility, and spectrum is what fuels those wireless services. We must make it a priority to increase the availability of spectrum for commercial use, both licensed and unlicensed, as quickly as possible.   

  Last week, Federal Communications Commission (FCC) Chairman Tom Wheeler announced that the agency’s timeline for the broadcast incentive auction has slipped from 2014 to mid-2015. It is important for the auction to be completed as soon as possible, but one lesson from the disastrous rollout of Healthcare.gov is that a short delay of this complicated effort may be justified. 

  Consumers will benefit from a speedy reallocation of spectrum for more valuable uses, but those households that continue to receive over the air TV broadcasts after the auctions must not be unduly disrupted during the channel repacking process. Congress was clear about this in the Spectrum Act of 2012, and the technical details to make this work deserve an appropriate amount of time and deliberation.

  As we all know, the mobile market is no longer focused on voice calls alone; it is increasingly about robust broadband Internet connectivity. During the committee’s recent broadband adoption hearing, we learned that one in eight online Americans now access the Internet solely through their mobile smartphones, rather than subscribing to a fixed broadband service. 

  With that in mind, I hope our witnesses will share their thoughts about what spectrum policies will make it more likely for wireless to develop as a substitute for, and a competitor to, wireline broadband.

  Getting more spectrum into the marketplace for broadband, via auction, to the parties that will put it to the highest use, is ultimately the best way for federal policymakers to encourage new services, spur competition, and benefit consumers. 

  In the incentive auction, I believe the FCC should let all interested participants freely compete against one another in the open market and should avoid putting its thumb on the scale as we are apparently witnessing in connection with the Justice Department’s Settlement Agreement in the American Airlines and US Airways merger. 

  The value of using spectrum auctions is that the free market is more effective at allocating spectrum than relying on the subjective opinions and predictions of government officials. American consumers should pick who wins in the marketplace, not the government. 

  And with the U.S. being the global leader in 4G LTE connectivity, this approach has clearly been very successful. By any measure – including usage, coverage, speed, and price – consumers have benefited enormously from market-driven spectrum auctions.

  As the FCC moves forward, its primary focus needs to be on how to maximize participation in the upcoming incentive auction, among both broadcasters and wireless bidders, not on how to limit their participation.  

  I agree with our colleague Senator Chuck Schumer (D-N.Y.), who recently urged the FCC to avoid imposing auction rules that: could discourage broadcasters from participating, could limit bidding by certain wireless carriers, and could ultimately “reduce the amount of spectrum offered as well as the revenue that would be generated in return.”

  Mr. Chairman, I ask for consent to submit for the record Senator Schumer’s letter, along with two additional documents that echo his and my concerns. The first is an analysis by Dr. Leslie Marx, a professor at Duke University and a former Chief Economist at the FCC; and the second document is a letter to the FCC from Larry Cohen, the president of the Communications Workers of America. 

  Instead of exploring auction rules to arbitrarily limit or benefit certain carriers, the FCC has the ability to consider setting a limit on the amount of spectrum any single bidder can win in the incentive auction. Such a limit, applying equally to every bidder, would at least allow all companies to have a fair shot at acquiring the spectrum they need while preventing any single entity from winning all the licenses. 

  At a minimum, such a proposal should be explored, as it seems to make sense and could result in an open and competitive auction. I hope our witnesses spend some time discussing this and other reasonable ways to find consensus on forward auction bidding.

  Another way to encourage more bidder activity, and to benefit rural areas in particular, is to auction licenses in a variety of geographic sizes. At a previous hearing, our committee heard that offering spectrum licenses covering smaller geographic areas can result in more bidders, more license winners, more revenue, and better service to rural areas. This approach appeared to work quite well in the 700 megahertz auction in 2008. 

  I would like to hear our panelists’ thoughts on how smaller license sizes have been used in the past, what the results have been, and how they could play a role in the broadcast incentive auction.

  Mr. Chairman, the FCC should not be distracted by proposals that could lead to less spectrum being made available and less auction proceeds being realized for national priorities like deficit reduction and FirstNet.

  Thank you again for holding today’s hearing.

Testimony

• Mr. Gary M. Epstein

  Chair, Incentive Auction Task Force and Special Advisor to the Chairman

  Federal Communications Commission
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• Ms. Joan Marsh

  Vice President, Federal Regulatory Affairs

  AT&T Services, Inc.
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• Mr. Hal Singer

  Senior Fellow

  Progressive Policy Institute
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• Mr. Steven K. Berry

  President and CEO

  Competitive Carriers Association
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• Mr. Preston Padden

  Executive Director

  Expanding Opportunities for Broadcasters Coalition
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• Mr. Rick Kaplan

  Executive Vice President

  National Association of Broadcasters
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• Mr. Harold Feld

  Senior Vice President

  Public Knowledge
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