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Panel I 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


Location: Washington, DC

REP. MARKEY: (Sounds gavel.) Good morning. The recently completed auction for licenses in the 700-megahertz band had a certain Dickensian quality to it. It was the best of auctions and the worst of auctions simultaneously.

First, despite the so-called D block license not selling, the auction raised over $19 billion. This is no small feat in current economic conditions. Second, I am pleased that the C block license did sell successfully. This license, for which the commission had the wisdom to adopt openness requirements that I strongly advocated for, will unleash hundreds of millions of dollars in investment in wireless devices and applications and create new jobs in an economy that sorely needs them. I congratulate Chairman Martin and all of the commissioners for this initiative.

However, in spite of these success stories, this is essentially a tale of two auctions. And so, with the good news, there is also some bad news. Obviously, the D block is disappointing, yet I believe that pursuing ways for public safety entities and the private sector to partner toward achieving a network that possesses nationwide interoperability and broadband capability remains our best option going forward on the D block.

There are several routes toward realizing an interoperable, state-of-the-art network for public safety entities, however, and multiple ways of implementing public-private partnerships. I encourage the commission to be open to new ideas in this area.

If the commission takes the opportunity to weigh new proposals that correct deficiencies in the previous plan, puts in place barriers to unjust enrichment, clarifies important details prior to a re- auction, and recalibrates the D block license conditions to account for what has transpired in the recently completed auction, the D block's recent failure to sell may ultimately prove fortuitous and we may yet achieve a successful re-auction that can advance several public policy objectives simultaneously.

Finally, we must also remember that the sheer amount of money that an auction brings in to the Treasury is only one of many objectives that Congress instructed the FCC to try to achieve in this or any auction. Last Friday I released a report from the Government Accountability Office on media ownership issues. That report highlighted the abysmal track record in our country of having women- owned and minority-owned radio and television broadcasting licensees.

Those broadcast licenses were originally given out in the in the 1940s and the 1950s. We cannot go back in time to correct the unfairness of distributing these public assets in such unbalanced form, and it is difficult, in the broadcasting area, to correct this injustice now unless an incumbent wishes to sell their license.

Yet in wireless, we have a new opportunity with the beachfront property of the spectrum. And what is the result so far? Well, at present, it looks like two mega-resorts are going up on the beachfront in the form of Verizon and AT&T, solidifying their wireless market and spectrum real estate positions. Yes, Echostar has won almost a nationwide footprint, not to compete with Verizon and AT&T in the mobile wireless market but, rather, to have spectrum as an adjunct to their satellite television service.

Women-owned and minority-owned businesses did not break through. There is no new national competitor to provoke new broadband competition, innovation and consumer choice coming out of the auction. As a result, the wireless third pipe, to compete with the telephone and cable industry, is proving either elusive or simply allied with one of the two existing providers in much of the country.

This is too cozy and not nearly competitive enough. The decision to eliminate spectrum caps by the FCC under Chairman Powell is proving highly ill-considered. Spectrum caps had ensured that incumbents couldn't gobble up all of the available spectrum and effectively box out would-be competitors from reaching the market. And the so-called spectrum screen of 95 megahertz that has substituted for the original cap has been blown away in this auction by AT&T and Verizon in eight of the top 10 markets and 17 of the top 25 markets where that amount of spectrum has now been exceeded.

The FCC must revisit these policy decisions in light of the recently completed auction and take corrective action going forward. The commission has the responsibility to learn from the licensing mistakes of the past and to widely disseminate licenses and promote greater broadband competition and should endeavor to do so.

I look forward to working with each of the commissioners as they wrestle with all of these policy issues in the weeks ahead. We have two excellent panels today. I look forward to hearing from our witnesses. The time for the opening statement of the chair has expired.

I now recognize the gentleman from Florida, the ranking member of the committee, Mr. Stearns.


REP. MARKEY: Okay, and that completes all time for opening statements by members of the subcommittee.

Marsha Blackburn from Tennessee is here. She's not a member of the subcommittee, but by unanimous consent she could make an opening statement; I hereby make that motion. I hear no objection. The gentlelady is recognized for that purpose.

REP. MARSHA BLACKBURN (R-TN): Thank you, Mr. Chairman.

I appreciate the opportunity to be here. I will waive an opening statement so that we can get to the witnesses. I will submit an opening statement for the record.

REP. MARKEY: Okay. The gentlelady -- we appreciate her and that gesture.

But just by adding that extra 30-second conversation we have made it possible for the ranking member of the full committee, Mr. Barton, to appear in time for an opening statement, and he is recognized at this point for that purpose.

REP. JOE BARTON (R-TX): Mr. Chairman, I'm going to submit it for the record. I've been busy with my avatar and wasn't able to get here earlier. (Laughter.)

REP. MARKEY: I appreciate that. And, you know, IBM announced the very next day that 6,000 of their employees were going to be given avatars for working with other members of the IBM empire. So I think we were really at the cutting edge.

And I appreciate the chairman now having an avatar himself, and I'll be looking forward to seeing you in Second Life after this hearing.

But we'll turn now to the Federal Communications Commission, and we welcome you back. You have been frequent visitors to this subcommittee, and this is at the very top of the priority list -- to get these particular issues correct for public safety and for competition reasons.

And we are very honored to have you back, Chairman Martin, to represent the commission, and if any of the other commissioners wish to make opening statements they will be welcome to do so as well.

So we'll begin by welcoming Chairman Kevin Martin of the Federal Communications Commission.


REP. MARKEY: Thank you, Commissioner McDowell, very much.

And that completes the time for opening statements from the commissioners, so the chair will now turn and recognize himself for a round of questions.

In the headlong pursuit of moving away from thousands of public safety entities all developing their own plans and networks -- which historically has made interoperability issues worse -- are we actually creating a new problem by having a single public entity in Washington and a sole network provider for the whole country call the shots for diverse areas of the country with distinct needs?

Let me just ask this question, yes or no: Should there be more focused regional emphasis while still insisting on national capability and interoperability?

Let me come across -- Commissioner Adelstein.

MR. ADELSTEIN: I think it's an option we should have on the table. I think we need to keep all options open and take a look at whether regional licenses would make sense, as well as a national.

REP. MARKEY: Commissioner Copps?

MR. COPPS: I agree.

REP. MARKEY: You agree.

Chairman Martin?

MR. MARTIN: I certainly agree that all options should be on the table. I think the challenge is how you determine -- how you solve the interoperability issues when you break up the licenses into smaller pieces, which is the thing that Public Safety highlighted for us last year.

REP. MARKEY: Commissioner McDowell?

I mean Commissioner Tate, I'm sorry.

MS. TATE: Yes, sir. I think we should be looking at everything, and I asked Public Safety about that when they were in my office last week, so you might want to discuss that with the next panel.

REP. MARKEY: All right.

MR. MCDOWELL: I agree with my colleagues; it's something we should consider, but I would have concerns about the interoperable aspect of it, and we should ask Public Safety on the next panel.

REP. MARKEY: What could be done to ensure that the next D block auction can simultaneously ensure public safety objectives while creating new wireless competition? Can you focus on spectrum caps, wholesale requirements, and should we have six regional licenses rather than just one license so that each region could develop its own public safety and competition strategy?

Chairman Martin?

MR. MARTIN: You certainly could try to focus on competition by having caps or wholesale requirements. I would highlight that the Public Safety themselves were very concerned about implementing those kind of requirements in their spectrum last time, so I would think that would be another thing that I would interested in what Public Safety's concern would be in that regard.

REP. MARKEY: Commissioner Copps?

MR. COPPS: Yes, on the spectrum caps and looking at wholesale, and a look at the idea of the six but cognizant of the problems that have been mentioned. But what we need really before we make these final decisions or commit to final decisions is getting the facts and the data and the analysis that we currently don't have. And that job is incumbent upon us and it's incumbent upon Public Safety and the commercial sector, too.

REP. MARKEY: Commissioner Tate?

MS. TATE: You know, when you brought up spectrum caps, of course, Rob and I weren't here, and so, you know, that's something that I'd like to have an opportunity to look at.

And I agree that Public Safety has got to be part of these discussions going forward because I know some of these discussions, you know, we had previously, and that's where we ended up where we are.

REP. MARKEY: Commissioner Adelstein, could the commission just insist that everyone of the regional licensees, if you went to the regional license model, had an interoperable system? Couldn't you just mandate that?

MR. ADELSTEIN: Absolutely. I think that it's not an impediment at all to interoperability if we structured the rules right. We could require that certain standards would be met that would be interoperable no matter who the licensees were. So you could have six or 10 or 20 different licensees, and all the systems would be required, as a condition of the license, to be interoperable.

REP. MARKEY: Commissioner McDowell, isn't that something that you could do now at the FCC, condition regional licenses, that they all have to be interoperable? Wouldn't that be a reasonable condition and something that you could enforce?

MR. MCDOWELL: Certainly we have the authority to do that, and it should be something that's considered in a public comment period.

REP. MARKEY: Commissioner and Chairman Martin, is that something that you could mandate as a condition if you moved to regional licenses, that they all have to be interoperable?

MR. MARTIN: Oh, I think we can always put that condition on it. I think it was practically how that could be achieved from a technical perspective is where the concerns were raised when we discussed that option last time.

REP. MARKEY: And do you know how many women-owned businesses won licenses, Chairman Martin?

MR. MARTIN: The commission doesn't actually keep track of how many women and minority-owned businesses. After the commission's changes in policies that occurred after the Adarand decision in the mid-'90s, the commission moved away from having designated entities based upon women or minority status and moved to them based upon small businesses alone. So all of the information we have is just what's self-reported, so we don't actually keep track of what goes in all of the licenses.

REP. MARKEY: Commissioner Adelstein?

MR. ADELSTEIN: Based on self-reporting, there were no women bidders who won. That may not be the final number, but based on those who reported themselves as women, not one out of over 1,000 licenses that were won were won by women-owned businesses.

REP. MARKEY: And if it's more than zero, it's not much more than zero --

MR. ADELSTEIN: That's right.

REP. MARKEY: -- out of 1,000; is that what you're saying? Do you agree with that, Commissioner?

MR. ADELSTEIN: There may be some.

MR. COPPS: I agree with that. I heard that there was one, so it's either zero or one.

REP. MARKEY: Commissioner McDowell, have you heard anything about women and minorities?

MR. MCDOWELL: I have not heard anything different from those figures.

REP. MARKEY: Commissioner Tate, have you heard anything about women winning licenses?

MS. TATE: I did ask, and I think that just anecdotally there may have been a woman who won 150 licenses. But again, we are prohibited from, you know, enforcing race or gender-specific reporting, so it's self-reported.

REP. MARKEY: No, I understand that.

MS. TATE: And I'm concerned, like you all are.

REP. MARKEY: We all have to be concerned by this. We all have to ensure that we include more minorities and women in the future of telecommunications for the 21st century. We gave away most of the licenses to white men who were already well-connected in the '30s, '40s and '50s, and to dig out of that hole is something that we all have to focus on.

The chair's time has expired. The chair recognized the gentleman from Florida, Mr. Stearns.


REP. MARKEY: The gentleman's time has expired.

The chair would just note that the Public Safety Spectrum Trust at no point has opposed to a wholesale strategy as part of a D block auction, so I just want to, you know, put that back out on the record once again.

Let me turn now and recognize the gentleman from Michigan, Mr. Upton.


REP. MARKEY: Great. The gentleman's time has expired.

Let me just ask you one final question, Chairman Martin. Going forward, are you also open to looking at the wireless roaming ability of regional players who won't have fully built out networks on day one or in all areas and need to provide service to compete effectively against national carriers?

MR. MARTIN: Oh, sure I'm open to it, but I do want to make sure that we're not undermining their incentives and/or requirements that they build out their networks as well.

REP. MARKEY: And much of the AWS spectrum is still unencumbered by government uses, so this is an ongoing issue. And do you all agree with the chairman's --

MR. MARTIN: Oh, sure. Obviously, if they have a license that they are not able to be building out on, that's a significant different story. What we were concerned about was the people who had licenses who had not built out but were trying to take advantage of roaming on someone else's. But if they've got a license but they have not built out, that's certainly a different kind -- that's a different exception.

REP. MARKEY: Okay, great.

Well, again, I want to commend the commission for the open devices and open applications conditions on the C block. I think that is working out well so far, and I think it's really changed the dynamic out in the marketplace. That auction is moving the industry along, and I believe if implemented correctly and enforced fully will unleash billions and billions of dollars of investment and give more choices to consumers across the country.

I want to commend Verizon as well for moving to embrace it in the auction; I think that's an important step. And clearly what we hear from every member today is that public safety is issue number one. So we're not debating over public safety here. That's not a debate in our committee. We're now debating over -- well, my mother used to say -- she'd first say, "Eddie, your father and I were going to donate your brain to Harvard Medical School as a completely unused human organ." (Laughter.) And that would be immediately before she would say, "You have to learn how to work smarter, not harder." So that's our goal. We have multiple objectives that we can achieve here, but we've got to be very smart, and if we do it and deal with the reality of what's left over after the completion of the rest of this auction, then I think we can accomplish it.

And with that and with the thanks of the committee, we thank you for your testimony, and we would like to continue to work closely with you towards the formulation of a policy here that finishes off this auction in a way that achieves those goals. Thank you so much for being here.

And then we would ask our second very distinguished panel to move up to where their name cards will be placed over the next minute or so.

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