Panel II of a Hearing of the Telecommunications and the Internet Subcommittee of the House Energy and Commerce Committee - Oversight of the federal Communications Commission (FCC): The 700-MHZ Auction

Interview

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REP. MARY BONO MACK (R-CA): I thank the chair very much and would like to point out that the three people still here are the gentleladies from California, so it's a great committee.

REP. MARKEY: "I wish they all" -- no wait, hold it. (Laughter.) That's -- that's what I've got here.

REP. BONO MACK: Carry on. First of all, I would like to thank you for this hearing and the panelists for being here today.

Dr. Bazelon and Mr. Zipperstein, even if the FCC creates as many of the obligations up front as possible and lowers the reserve price, do you think we are likely to find a commercial partner to build a shared public safety network and one that meets public safety needs through a conditioned auction approach? Or are we better off using a government contracting model, where Public Safety puts out a request for proposal and negotiates with all comers?

MR. BAZELON: The reason I think the public-private partnership is unlikely to succeed is because spectrum as a cost of commercial business -- a wireless business model as I've seen it valued in the 10 to 20 percent of revenues range, and that means that even if you gave away the D block, for it to be a good idea it would have to be the case that the public-private partnership was almost a good idea on unconstrained commercial spectrum and just needs a little bit of a push to push it over free spectrum. And I think it's very unlikely that the economics are such that that's the case. I think much better is to -- is a procurement model.

REP. BONO MACK: And Mr. Zipperstein?

MR. ZIPPERSTEIN: I would agree with that answer.

REP. BONO MACK: Thank you.

MR. ZIPPERSTEIN: I'll just add that as the chairman asked me, the economic imbalance is such that even if we tinker around the edges, if we maintain the same fundamentally flawed structure, I don't think that we'll produce a winner for that spectrum.

I do think that this issue of interoperability is one that we should treat the same way we treat how we resolve our country's need for any other national security platform, whether it's fighter jets or submarines. Let's marry the expertise of the private sector with the needs of the public sector. Let's have an open and transparent competition so that public safety can select the system that works best for them. We have networks in the ground already. We operate and build networks. So do our competitors. We can put those to work for public safety.

REP. BONO MACK: Thank you.

Mr. McEwen, Mr. O'Brien, have any entities approached either of you expressing interest in bidding on restructured D block auction and partnering with you? If so, how many and who are they?

MR. MCEWEN: Has anybody since the auction approached us and said that they are interested in bidding? Is that the question?

REP. BONO MACK: Yes.

MR. MCEWEN: No. I haven't had any discussions with anybody that's said specifically. We've had some indication from people that there's an interest. But nobody has stepped forward any more than there were before the auction.

REP. BONO MACK: All right.

Mr. O'Brien?

MR. O'BRIEN: Let me make sure I understand the question. We did have conversations with, I would say, a half a dozen companies, including companies like AT&T and Verizon and Google and Frontline prior to the auction at which at length we discussed the potential that they might be coming to the auction. Of course, that's far from an agreement on their part to come to the auction, as it turned out.

Since then, from like the 3rd of April, which was just a handful of days ago, we have started the process of reaching out to and we have meetings set up with a number of potential parties that will discuss it with us. But I don't think I -- it would be fair to them to characterize at this stage what their level of interest was. I'll know that a lot better after the next couple weeks.

REP. BONO MACK: Can you be --

MR. O'BRIEN: But we're in that process.

REP. BONO MACK: -- a little more specific as to the types of entities or the number?

MR. O'BRIEN: The types of entities are established operators, vendors and other players in the telecom space that, you know, it might be logical to be part of a consortium. We're looking at this point at the most likely outcome for the next D block will be a consortium of players rather than a single player.

REP. BONO MACK: All right. Thank you.

Mr. Chairman, I yield back the balance of my time, unless you want to finish singing the song. (Laughter.)

REP. MARKEY: As a duet, I would. (Laughter.)

REP. BONO MACK: No, thank you. (Laughter.) I yield back.

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