Future of internet governance. Last years conference showed us that through this deep International Division of over whether to subordinate the open internet to world governments, including repressive regimes, the u. S. Needs to be a beacon for freedom and openness in this battle. Given these risks, we propose enhanced transparency and procedural reform, clearer protection for americans, and baseline protections for international users. With regard to transparency and procedural reform, we think all governments should share with citizens meaningful information about their surveillance laws, their legal interpretations, and judicial procedures that govern the exercise of this powerful authority. Of course, the u. S. Cannot demand this from others unless it leads by example. Furthermore, companies should be permitted to disclose publicly to their users the precise volumes of requests from governments. Businesses should not only be prermted to release transparency reports but encouraged to do so. We categorically reject the notion that open government will cause undue damage to security. Transparency and criminal surveillance have been the norm for years and have not appeared to materially affected Law Enforcement. In order to present a robust check on the government, the fisc must also evolve to include a wellresourced advocate to provide an alternative view point, particularly in situations involving novel questions of law. Second, focusing on protection for americans. Federal laws addressing the circumstances in which the government may collect american data for National Security purposes are badly in need of reform. Collection of metadata is one area that is most obvious as it reveals a great deal of sensitive, private information. Furthermore, important First Amendment rights of association are implicated by the government assembling its own version of your social network and their own analysis. The usa freedom act addresses this problem by explicitly prohibiting this type of collection, both on the internet and on telephone net works. Thats one of the reasons we are supporting it. Third and finally, protections for foreigners. A difficult subject to deal with but despite the global interconnected nature of the internet, the u. S. National Security Policy continues to presume u. S. Citizens deserve protection from unwanted surveillance while others do not. If foreigners lack baseline privacy assurances, foreign competitors will supplant u. S. Leadership in Internet Innovation and digital commerce. Thus, undermining strategic economic and other security interests. This is especially true Going Forward as foreign markets are increasingly important. Thank you very much for the opportunity to testify. Look forward to your questions. Thank you very much, mr. Black. Our next witness is julian sanchez, who is currently a Research Fellow at the cato institute, focusing on the intersection of technology, prooif circumstances and Civil Liberties with a focus on National Security and surveillance issues. He previously served as the washington editor for a Technology News site and has written for a wide array of publications. Mr. Sanchez, welcome. Thank you, senator whitehouse. Its a privilege to address this committee. I want to begin my suggestion to step back from the details of the disclosures in recent months, we find a disturbing pattern across multiple programs and authorities focusing in particular on the Metadata Program, the now defunct internet Metadata Program and upstream collection under section 702 of the fisa amendments act. In each of these cases what we see is extraordinary but nevertheless limited authorities were secretly interpreted in ways that permitted far more extensive collection than certainly members of the general public and even i think many legislators believed at the time of passage had been authorized. This was done in part because the fisa court, which was established on the premise that it would be authorizing and finding probable cause in cases of specific and traditional targeted surveillance, instead found itself in the position of addressing broad programs of surveillance, often involving novel, legal, or technological issues. Its not clear that body was well established to consider. In the metadata cases, these interpretations took to form of an unprecedented reading of relevance that held entire databases containing information about millions of admittedly innocent americans to be relevant on the grounds that a fishing expedition through those records might ultimately turn up evidence that would not otherwise be detected in the absence of some specific grounds for suspicion. That is probably true, but it is of course true of any phishing expediti expedition. There is no real limiting principle in that argument for any type of records. I was particularly disturbed to hear earlier, mr. Litt refuse to reassure us that the scope of the records obtainable under section 215 does not exclude the contents of Digital Communications or cloud stored documents. Its also particularly troubling to see this applied in the case of the internet Metadata Program, because in that case, the shortsighted holding of smith versus maryland was applied as though it referred to metadata generally, which is certainly not a term we find in had the 1975 decision. When in this case, it involved e ma email metadata thats never processed by the internet backbone provider from whom it was presumably obtained. Theres an additional constitutional question in that case. In the case of 702, we know the Supreme Court relied on the recent ruling in amnesty v. Clapper on representations that only communications to or from specific overseas targets were being intercepted. We now learned, of course, that also communications referring to overseas targets would be intercepted and in many cases for technical reasons, a single email meeting selection criteria would lead to the entire inbox of the commune cant being obtained, including again potentially entirely domestic emails on what the court believed could be a scale of many tens of thousands per year under that one collection program. In each case, additionally, we learned that for months or years the actual Technical Details of how these programs operated were misrepresented to the fisa court, which was of course therefore not able to effectively conduct oversight and in each case, again, elaborate safeguards and restrictions imposed by the fisa court as a condition of authorizing those programs were effectively neglected because of the vast scale and complexity of those programs. Additionally in many cases, we found that the claims of efficacy made at the time dont appear to have held up well over scrutiny from many dozens of foiled terror plots weve gotten down in the case of the metadata case to one instance involving funding and Material Support where it appears to have played some uniquely valuable role. Given the limitations imposed by the fisc, its not clear why more traditional targeted records orders could not have been used without incidentally sweeping in millions of innocent persons records. We are assured that the problems detected with these programs have not been willful or intentional. This is not especially comforting to me for several reasons. The first is that if we look to history, we find that in general, abuses of intelligence powers were committed by people who were well aware of the oversight mechanisms in place who often took elaborate steps to gain those restrictions. In the cases of Bradley Manning and edward snowden, steps were taken to evade oversight mechanisms. We know that certainly happened many times in the past. Its why abuses went undetected for so long. Additionally, the scale of collection itself makes abuse more difficult to detect and less likely to be detected when it does occur. Think of the case of illegal wiretaps it of the southern christian Leadership Conferences offices. That at least was halted by an attorney general who found the suspicious fact the wiretap existed and there was record of it. When youre doing collection on this scale, the mere existence of communications or records about an Innocent Party are not themselves that kind of essential indicator. Finally and most generally, i would just encourage the committee to think architectu l architecturally. We should not authorize extraordinary architectures of surveillance on the basis that we now have great confidence in the probity of the persons controlling the levers. James otis, whose condemnation of the writ of assistance was part of the inspiration for the fourth amendment, condemned those writs saying it is from their mere existence that every household or in the province becomes less secure. And there is a sense in which while they may serve some role in protecting us against foreign attacks, we are less secure when the government maintains vast databases on americans without particularized suspicion. I thank you and look forward to your questions. Thank you, mr. Sanchez. Our final witness is professor kerry cordero, whose bio i have just mislayed, but im sure you can get me another one very quickly. Thank you. She is an adjunct professor of law and the director of National Security studies at the Georgetown University law school. Shes previously held several National Security related positions with the department of justice and the office of director of national intelligence. Shes also testified before this committee before. Welcome back, professor. Please proceed. Mr. Chairman, thanks very much. Thanks for the opportunity to return to the committee. Since the october hearing, the conversation, i would suggest, has shifted somewhat from where it first was. First, i would suggest that the conversation has evolved from objections to specific programs to a discussion of our understanding of intolerance for foreign Intelligence Surveillance activities more broadly. Second, the legislative proposals are coming closer to scaling back National Security legal authorities in a way that might take the country back to pre9 11 standards. And third, the path forward on authorized Public Disclosure in a way thats responsive to the concerns of the previous sector remains a worthy goal but still a significant challenge. With respect to the metadata collection under the Business Records provision of fisa, the power of metadata. Basically, this argument is that metadata is a powerful tool, can reveal an awful lot about us and there should be limits on the collection and use of it. I dont disagree with the general proposition, but the problem with the argument made on 215 is that the worrisome assemblage of americans metadata bears no relation to the existing 215 Program Congress is currently considers. It does collect an enormous volume of americans telephone detail records, but the collected information does not appear to include content of phone calls, names of subscribe subscribers, Payment Information or location information. The vast majority of it is never viewed by human eyes and the records are handled under court order rules. So of the arguments that congress should outlaw collection altogether for better or for worse, every day americansoutlaw bulk communication all together, we all, regular people, government leaders, as well as those who are National Security threats, use the internet, computers and smart phones to communicate. And so just as everyday citizens should not with expected to con ve convert to the Postal Service or land lines. It is just as unrealistic to expect citizens to unplug as it is to expect or require the nsa or the fbi to use 20th century collection, analytic or investigative techniques to protect the nation from 21st century threats. A few observations on s1599, the usa freedom act that has been submitted. Sections 101 and 201 would change the legal standards to implement devices by applying connection to an agent of a foreign power. The likely intended effect of these provisions is to eliminate the 215 bulk telephone program. It would have far more existing consequences. The standardings are currently aligned on the National Security side with investigative authorities in the criminal context which operate on a relevant standard. By raising the standard, these zexzs would render these techniques nearly useless which is when they are precisely most useful. These changes could return us to the days prior to 9 11. Similarly, section 501 would amend the National Security letters by requiring the requested record to also have a connection to an agent of a foreign power. This would have a similar effect in sterms of severely limiting the fbis ability to kublgt investigation. 301 would appear to inhibit the Intelligence Community from section 702 of fisa to search for u. S. Personifications. The nsa can query the communications already acquired under 702. The proposed legislation would only take place with a criminal warrant prior to judicial approval based on probable cause. And in my written statement, i give an example of how this could po tenl shlly play out in practice. A few words just on a particular proposal to enhance transparency thats in the bill. In my view, theres substantial value with the executive branch of the private sector to rebuild confidence between them. But a particularly problematic proposal is section 502. I believe that this is not only targets but persons of communications who are incidentally collected. If thats the sbent, it would actual actually grade the sbel juns community personnel, look at, grade, keep records aport and record on information for records that they would otherwise be in pursuit of discovering, analyzing and reporting only foreign intelligence information. So, again, thank you for the opportunity to be hear today and i look forward to your questions. Thank you very much. Let me start with a question for mr. Black. There is legitimate concern that the knowledge of our National Security activities cast a shadow on the ability of American Companies to compete internationally. That was the basis of your testimony. Do you believe that foreign customers, if they sign up for a service with waweah, that the Chinese Government is not looking into this data . Or the russian government, if they sign up, in areas under its jurisdiction, or the french government, for that matter . Do you think that the yiegts government is the only government thats frying to take advantage of Big Government . Ill do think the reality is that governments in general are inclined to want more and more information. Too much. Its what we address in our testimony is, in fact, standard that all governments should be asked to undertake disclosure in terms of limits. The difficulty is that the yiegts is in a difficult position in credibility when we are you saying the russians are more advanced than the United States is . Im not doing a come parson. Im simply saying that i dont think most people, the citizens and the customers of the world, think that United States laws first of all, i do believe you have to protect the balance of this, dont get me wrong. But are there any other countries for the next behavior . Is there another country that has a bet ere i think theres many that dont do as much as we do. I can name some. Theres very tiny little countries that probably dont have a phone system. But in terms of the Major Economic and political actors on the stage. What do we want . Tremendous empowerment, tremendous dip low matic and political opportunities and for billions of people around the world . Do we want one where people can have association with other people without being spied on by their government ord our government or any other government . Is that a desirable outcome. If so, how do we take steps in that direction . Or do we accept the reality to go into maximum collection and go in the big brother direction as far as we can go. I dont think thats a future i look forward to. Its difficult to want to restrain especially with our government who really do believe in the motivation of what theyre doing. But they are zealous and more effective. And they are, in fact, in a position where they are able to gather a great deal of information. So you think our Government Security services are more dangerous to Civil Services than china and russia . Are they more interested . Absolutely. No doubt about it. You agree that our government ov overof our national oversite is far more once again, i cant compare to other people. I dont know the details. I certainly had a presumption of that. Do i any we have lived up to the best intent and good faith of our constitution with the legal constructions, no, i dont think weve lived up to the principles. The core prince pms of the first amend. And fourth amenldsment, as faithfully as we cocould. Are we better . Of course. Thats not a question that i think is fair. You take a different view than the courts that have overlooked this. I think some are in a position of higs tor kal base. With the Business Records theres no present decision by any court that suggest that is theres been that this is operated in violation of the fourth amendment. It would take a new dwgs to decision to make that conclusion that has not yet been rebderred by any court. Is that correct . Im not confident enough. I have some Great Councils that work for me. I would suggest the various efforts to get those questions raised. Youre the one that said this is in operation of the fourth amendment. Im asking you if you can support a case for that proposition . Kouncounselor you know, i believe the fisa court made ruling that certain practices orders the ord rs. Thats not in the constitution. Professor, for how long has incidental collection with communication with people who are not the sublt of the warrant been a fact in Law Enforcement . Well, both on the criminal side and on the National Security side, there always is going to be incidental collection. So the criminal tieltle three wiretaps hanldle it in one way. On the National Security side, its for the u. S. Personalization. Its always been a factor. The min mization procedures, particularly on the any of the fisam min mization features are approved in the kourlt. So, for as long as there has been any authorized government exceptions communicationings. Thats right. I wonder if you could tell me your position on some kind of adversarial process as i have advocated as a constitutional advocate and other forms in the fisa that might be feasible. I would step back from a moment and just say that in cases where you have something that is an authority clearly envision something relatively targeted to acquisition and records with nexus to terror espionage schts. The appropriate move, at that point, is if its believed that some sort of bulk position used in that authority, is to return to congress and not leave that decision in the hands of the fisa court. When a request is brought too effectively, i think it would be better to have congressional authorization. In closer cases, i any what we can see from some of the opinions that have been release ds first, i think it would benefit the courts proceedings to have. But also, i think in particular to have technical expertise. I alluded to earlier with respect to the use of pen register authority to use interim data where you dont just have the number and the content. But layerings of method data and content. Do you think that we aught to have a constitutional advocate . I think that would be extraordinarily helpful. But, also, i think a technical adds vise ri capacity of some kind would be useful. Sometimes, the most difficult about the ways they intersect in surprising ways where, often, there isnt on point. I galter there is no need for some sort of an adversarial process. You would be willing to support some sort of process . Thank you, senator. Sernlly, since the oblgt hairing, this conversation has evolved. There are different proposals. In my view, as we just said in the prior hearing, based on the kurnts procedures that take place wnl the department of justice and the Intelligence Community and the court, in my view, i think that the kurnts process is independent. These are independent article iii judges who make judges on their own. In my view, there doesnt need to be an adversarial process and i think the current process is su fishlt. However, tweenl the proposals between us establish iing betwe an advocate if the court believes it needs it. And thats because your loathe to create a bureaucracy . Or what is the reason . Sure, several reasons. Theres multiple offices and legal aufgss and different layers of management that are involved in reviewing fisa matters. I think it is already bureaucracy heavy. And the wail that the aufgs is describing these legislative proposals, it would simply add to that process. I am concerned that overtime, there has been a very constructive relationship between the executive brampk and the fisa court. I also worry that the office of special advocate would in so some way advocate harm that sort of established relationship of trust by being in the middle. With respect to the proposals to sntd the problem this relationship of trust has actually undermined trust in the American Public . And really threatens to completely e vis rate comforts and operates in skrelt and makes secret law. And, in the end, the relationship of trust would undermine the whole system . It will have to operate in secret, too. So just as the creation of the fisa court in 1978 and the creation of the office that worked in the Justice Department that was an independent, not Political Office at the time was created to be this independent participant in the process. Now, people dont put in terms of the meeds future, i dont actually think in the long term, because it will operate in secret. It will operate in secret that could provide for some greater measure of transparency. It affects americans around the world or at least in our country. But anyway, my time is expired and thank you to the witnesses for being here today. Thank you, senate tosh. Im also grateful to the witnesses to help conform about this committee. We go about our decisions. I welcome them. And we have two weeks . We will hold the record of this hearing open for wasnt additional week for any further materials anybody wishes to submit. And with that, we will adjourn the hearing. On the next washington journal, the budget field budget deal and defense programs will be the discussion. After that, a recent poll conducted regarding millennials views on politics and public service. Then a discussion on the future. F Guantanamo Bay the guest will talk about provisions when the National Defense authorization act that pertain to the facility. Washington journal is live every day at 7 00 a. M. Eastern here on cspan. Hearing on the upcoming auction to free up spectrum for wireless communications. Gary epstein is the federal Communications Commission spectrum auction chair. Fccier in the week, the announced plans to delay the option to mid2015. This is an hour and 45 minutes. Hearingead and call a to order. I want to thank everyone for being here. Early 2012, we passed Bipartisan Legislation which originated in this committee to make available in this committee a significant amount of new spectrum for commercial use at the same time establishing and funding a Public Safety wireless broadband network. Theart of that, the fcc has authority to conduct voluntary incentive options of spectrum. The sec is in the midst of for theup the rules first of these incentive options. Includee rules protections to make sure that the auction does not unduly harm tv stations that are not interested in participating. Congress rightly left many practical and technical decisions to the federal as thecations Commission Expert agency. Today, the committee will hear from the sec and various stakeholders about what it will take to craft a successful incentive option. Designing one of these is immensely complicated, possibly the most complicated of these type of options ever designed by the fcc. They must get a sufficient number of broadcasters to participate in a reverse auction in order to have adequate spectrum to sell the forward option. Forward option, the fcc must balance competing interests with the need to raise enough money to cover the incentive payments and pay for the priorities set forth in the 2012 legislation. During the repacking process, the fcc must meet its statutory duty to make all reasonable reasonableall efforts to protect remaining tv stations coverage areas while designing a practical and plan forband land mobile Wireless Services. As you can tell, this is complicated. On the technical side, the fcc must also craft software and hardware to accomplish this first ever incentive auction. Of course, we have learned in the last few weeks that software and hardware are important when it comes to these types of things, and they want to get it right. Getfcc if the fcc is to it right, it means Innovative New Wireless Services and more robust Wireless Networks to meet demands, ainsatiable revitalized tv broadcast industry, and a new International Precedent and standard for smart spectrum policy. Panel of have a large witnesses today. Its unusual for us to have seven, but if there was ever a topic that would require this many witnesses, i think this is it. On friday and this hearing is also very timely because on friday, the fcc chairman set a to hold an auction in the middle of 2015. Encourage everyone here on the panel today, all the stakeholders who are watching and participating, to work constructively with the fcc to make this auction a success. I look forward to hearing your testimony. Thank you, mr. Chairman, for holding this hearing. I want to thank our witnesses for being with us today. American consumers are hungry for more mobile conductivity. It a priority to increase the availability of spectrum for commercial use,. Oth licensed and unlicensed chairman wheeler announced that the agency timeline slipped from 2014 to mid2015. It is important for the auction to be completed as soon as possible, but one lesson from the disastrous rollout of. Is that a short delay healthcare. Gov is that a short delay may be useful. Congress was clear about this in the spectrum act of 2012, and the Technical Details to make this work is irv an appropriate amount of time and deliberation. As we know, the mobile market is no longer focused on voice calls alone. During the committees recent Broadband Adoption hearing, we learned that one in eight online americans now access the internet to lead through their mobile smart phones rather than subscribing to a fixed broadband service. With that in mind, i hope our witnesses will share their thoughts on what spectrum policies will make it more likely for wireless to develop as a substitute for an competitor to broadband. This is ultimately the best way for federal policymakers to encourage new services, spur competition, and benefit new services. I believe the fcc should let all participants really compete against one another in the open market and should avoid putting its thumb on the scale, as we are apparently witnessing with the agreement in the American Airlines and us airways merger. The value in these auctions is that the free market is more allocating their government officials. American officials should pick who wins in the government who wins in the marketplace, not the government. This approach has clearly been very successful by any measure, including usage, coverage, speed, and price. Consumers have benefited enormously from markets back from auctions. As the Commission Moves forward, the primary focus the to be on how to maximize participation in the upcoming incentive auction among both rod casters and wireline bidders, not on how to im sorry, wireless bidders, not on how to limit their participation. Auction rules could discourage broadcast airs from participating, could limit certain carriers, and could ultimately reduce the amount of spectrum offered as well as the revenue that would be generated in return. I would ask for consent to submit for the record senator schumers letter along with two additional documents that echo his and my concerns. Without objection. The first is an analysis from a professor at Duke University and former chief of the fcc. Instead of exploring auction rules to arbitrarily limit or benefit certain carriers, the fcc has the ability to consider setting a limit on the about the amount of spectrum any single bidder could win in the prospective auction. Such a limit applying equally to every there would at least allow all companies to have a fair shot at acquiring the spectrum they need while preventing any single entity rome winning all of the licenses. At a minimum, such a proposal ought to be explored, as it seems to make sense. I hope our witnesses spend time discussing this and other reasonable ways to find consensus on other forward auction bidding. Another way to encourage more to auction licenses in a variety of geographic sizes. At a previous hearing, our Committee Heard that offering licenses can result in more bidders, more license winners, more revenue, and Better Service to rural areas. The approach appeared to work quite well in the auction that appeared that occurred in 2008. I would like to hear our panelists thoughts on how smaller licensed sizes have been used in the past, what the results have been, and how they could play a role in the broadcast incentive auction. 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 first net. Thanks again for holding todays hearing, and i look forward to hearing from our panelists. Thank you. Again, i want to thank our panelists were being here, and you all know your written statements will be made part of the record, which we understand will be a more complete statement. If you all could limit your remarks to three minutes each typically we go five minutes, but the rumor going around the senate rumor mill we do not know if it is ever true, but we think we will be having votes around 4 00 on the floor. I dont know if we can finish this hearing by then, but if we could keep the Opening Statement portion shorter, we will have a better chance of doing that. Let me just run through who is on the panel, and then i will recognize mr. Epstein. First, we have gary epstein, chair of the Incentive Auction Task force and chairman of the federal Communications Commission. Next on the we have ms. Joan marsh, Vice President of federal regulatory affairs, at t services incorporated. Atn, a senior fellow gress apostate it progressive policy institute. Then, mr. Preston padden, executive director expanding for broadcasters coalition. Next on the executive Vice President of the National Association of broadcasters, and last and certainly not least, senior viceld president of public knowledge. Mr. Epstein. Good afternoon, members of the committee. Thank you very much for the opportunity to discuss the commissions efforts to carry out congress statutory direction in designing and implementing broadcast Television Spectrum incentive auction. This means of repurpose and spectrum for mobile broadband is an important part of ensuring that our Wireless Networks are capable of supporting the critical economic Public Safety thomas, and other important services, which are guided by the primary principles expressed in the act. Alleviating constraints to growth and development by creating a process for repurpose and the maximum amount of spectrum for licensed and unlicensed flexible use. Two, fulfilling our statutory obligations and congressional objectives that include reimbursing repack broadcasters, helping to fund first net, and reducing the deficit. Three, while providing a unique financial opportunity for participating broadcasters, while preserving a healthy broadcast service for those who do not contribute their spectrum, and four, promoting innovation and allowing the u. S. To continue to lead the world in a new generation of licensed and unlicensed wireless technologies. We have engaged stakeholders in the public to provide an open dialogue about how the auction should work. We have listened to stakeholders, analyzed issues and worked to develop actual software systems. Stakeholder engagement has been the cornerstone of this proceeding. We have released detailed Public Notices seeking comment, we have held six public workshops on topics including channel sharing, broadcast transition costs, and unlicensed spectrum, and participated in over 300 meetings. In addition, we expect to release additional Public Notices before we finalize our recommendations. Our new chairman is at the helm, and we have a full commission with the addition of commissioner oreilly. We have been conducting extensive briefings on a full range of issues under consideration. Chairman pryor noted, chairman wheeler issued a blog on friday, stating that we expect to complete developing policy recommendations and to present these policy to thendations Commission Early next year, which will enable the commission to vote on the report in the spring. Following the adoption of the report in the second half of the year, we plan to release an auction comment Public Notice and procedures Public Notice. The timeline will allow us to conduct the auction in mid2015. Throughout our entire process, we will be researching, developing, testing, and retesting the operating system necessary to conduct the auction. We will ensure that the operating system and software meet the strictest performance requirements and work from the moment the first bid is placed until the final broadcast station is repack. We have made significant strides with respect to each of the closely interrelated components and plan to make the auctions success. We will hold an auction which fulfills the statutory objectives and congressional priorities, including funding first net, making a substantial available,pectrum preserving a healthy broadcast industry, and promoting innovation. Thank you very thank you. Thank you for inviting at t to join in the discussion today. Much has changed since the incentive auction proceeding was initiated by the Commission Last fall. A once struggling tmobile has dramatically improved its portfolio by acquiring additional spectrum, and earlier this year, metro dcs, fortified by its improved spectrum position, tmobile has completed a robust deployment and runs ads claiming that the network is less congested than at t. In each of the last two quarters, tmobile lead the industry in postpaid phone ads. Sprint, for its part, has by far the largest spectrum arsenal in the industry. Its holdings are so significant that it shocked he Wireless Industry a few weeks ago when it announced it was no longer interested in pursuing the h block at auction, a block of spectrum it had long pursued. Against this backdrop of robust competition, the fcc has made hastantial progress and built a significant record on a wide range of issues. Yet, many open issues remain, including the key question of who should be permitted to participate at the auction and by what rules. That will be the focus of my comment today. At t continues to believe that an open and nonrestricted auction will raise the most revenue while producing a multiplicity of winners. History shows this is true. In the 700 megahertz auction, which was open and not restricted, 200 qualify to participate, and over 100 bidders won licenses. While some allege that at t dominated that auction, the fact is that at t bid on and one spectrum in only a single block of the five available at auction. Nonetheless, some argue that new rules must now be adopted to ensure a multiplicity of winners. If that is the goal, the lead proposal for restrictions in the auction, the t mobile dynamic faret proposal, falls short. The proposal would impose term attic restrictions on at t and verizon while leaving them and others free to run the table, should they so choose. Indeed, if the proposal were adopted, at t and verizon would be limited to bidding on a single five megahertz pair in most major markets, an amount that even tmobile emits is insufficient for lte deployment even tmobile admits is insufficient for lte deployment. We also believe that such an approach will ultimately undermine auction success. In stark contrast to tmobiles proposal, some countries have rules that adopted define the amount of spectrum any it or can acquire at auction. Like any proposals that restrict participation, these proposals could suppress bidding competition and impact auction revenues, but assuming such limits were adopted appropriately, the approach would at least ensure multiple winners in a fair and discriminatory manner. One final note on scoring we are convinced by recent advocacy that no scoring is the best approach. It is simple and transparent. It avoids price discrimination and perhaps most importantly, it will motivate participation. Without willing participants, this auction cannot succeed. Thank you. A key policy issue facing this committee is whether to impose asymmetric limits on the amount of spectrum that a bidder may acquire at auction, depending on the location of the spectrum bidders holdings. In april of this year, the department of justice advocated for policies that would support an asymmetric spectrum cap, designed to favor bidders that lacked socalled lowfrequency spectrum, and in his first major policy speech at ohio last week, the federal Communications Commission chairman, tom wheeler, cited the dojs letter in support of such limits. I want to make three points about the wisdom of an asymmetric spectrum cap from the perspective of an economist concerned with promoting consumer welfare. First, as a condition of slanting auction rules in a way to favor certain bidders, one must establish empirically that carriers without access to low frequency spectrum are in paired in their ability to compete effectively. Although this particular input is not distributed uniformly across carriers, it is hard to detect any impairment in the output market. Despite its lack of low frequency spectrum, sprints net additions for contract customers were up 18 in 2012, and during the Third Quarter of 2013, sprints Postpaid Service revenues and average revenue per unit hit record levels. Tmobile, another carrier that relies on 320 spectrum, enjoyed its biggest growth spurt in four years in the Second Quarter of 2013, adding 1. 1 million new subscribers. In july, july was gaining to subscribers from at t for every one it lost to at t. This is hard to square with the notion of impairment. If access to lowfrequency spectrum were essential to compete effectively, as the doj implies, at t and verizon would be running away with the wireless prize, but u. S. Wireless concentration, as measured by the fcc, has held steady since 2008. If sprint and tmobile continue to grow faster and steal customers from at t and verizon, wireless concentration could actually decline in coming years. Perhaps the alleged impairment has manifested itself in the form of rising wireless prices. Not here, with one exception in 2009 when prices held steady, u. S. Wireless prices have declined every year since the bureau of tracking them in 1998. According to a recent survey commissioned by the Canadian Telecom regulator, u. S. Mobile broadband prices were within a few dollars of comparable offerings of five gigabits per month plans in canada, the u. K. , and in japan. Second, given the nascent and substitution, regulators should not narrowly focus on promoting wireless broadband competition. Instead, they should be focused on promoting broadband competition in any form. According to the fccs latest deployment data, 62 of u. S. Households had three or more broadband providers capable of supporting download speeds of six megabits per second. Adding one more broadband pie to the remaining homes served by one or two providers by stimulating investment by a large, nationwide wireless carrier will generate significantly Greater Consumer benefits than promoting the novatel wireless entry. Third, my last point, less restrictive remedies can address any alleged impairment leading to competition concerns. For example, if regulators do not like the outcome of an unrestrained option, they have the power to compel ex post divestiture under existing law, and if regulators insist on going down the path of spectrum caps, symmetric auctionspecific bidderst treat all equally would protect against the remote possibility that any single dinner acquired too much spectrum at auction that any muche bidder acquired too spectrum at auction. Thank you. Chairman and members of the committee, thank you for allowing me to testify. I am here on behalf of the nations leading association of competitive wireless carriers. Our association is made up of over 100 competitive carriers, ranging from small, rural providers, serving less than 5000 consumers, to regional and national providers, serving millions of consumers. The entire mobile ecosystem is dependent on vibrant competition in the Wireless Industry, and a criticalpectrum is element in supporting competition. Our Diverse Membership is bound together by a shared goal of a competitive Regulatory Framework and a shared concern over the growing market power of the twin bells. We do not need an industry marching towards a duopoly. I know several members of this committee as well as the sec, doj, and the Small Business administration have voiced similar concerns about the increasingly consolidated nature of the industry. The incentive auction provides a unique opportunity to promote competition and allow carriers of all sizes access to a limited resource that meets consumer demand. We are prepared to invest, innovate, and create jobs, but competitive carriers must have a fair opportunity to acquire the resources to compete, and the fcc has one shot to get it right. A successful incentive auction must attract sellers and buyers alike, maximizing participation in both the reverse and forward options. The fcc must provide all carriers a meaningful opportunity to bid for spectrum, focusing on four critical areas. This will increase competition, and we also believe it will enhance revenues. All carriers, including the largest carriers, must have an opportunity to bid on spectrum where needed. One or two carriers should not be allowed to walk away with an entire pie. Spectrum should be available to allow participation by national and rural carriers. This will ensure open ecosystem access via every carrier, and i commend the members of this committee for their work to restore interoperability. Lets learn from the past. Interoperability is essential. Finally, policymakers should reject bidding packages that keep smaller carriers from accessing spectrum. On the reverse side, broadcasters must show up. They must participate for a successful option. The whole purpose is to reallocate valuable, underutilized spectrum to a higher, more efficient use. Failure could have significant consequences for competition and consumers. Under the statute, the committee was wise. All will fund first met, a public Emergency Responder network. While the b claim 600 megahertz is critical to the funding sources, the incentive auction is one of several streams established for the spectrum under the spectrum asked to fund the creation of first net. Fortunately, the goals of creating competition and raising revenue are not mutually exclusive. Auctions with the greatest number of bidders are typically the ones that raise the most revenue. In summary, to meet these complex, multifaceted goals, we propose the fcc take steps to give every carrier an opportunity to participate and possibly win in this muchneeded low bandwidth spectrum for broadband and after a decade of consolidation, a successful incentive auction is vital to promote sustainable competition for the digital age. Thank you for the opportunity. Thank you. Thank you, mr. Chairman. I served as executive director of a group of more than 70 tv stations who are open to voluntary participation in the incentive auction under the right circumstances and are committed to making the auction a success. Consumer demand for wireless broadband is increasing like a hockey stick. Even the dearth of other sources of additional spectrum, the fcc should seek to reallocate the 120 megahertz specified in the National Broadband plan. Unfortunately, the fcc has not the Critical Mass of spectrum sellers that would be necessary to have a successful auction. Without sufficient tv spectrum sellers, there will be no auction. From this point forward, every issue must be evaluated through the prism of whether it will help or hinder the effort to attract tv spectrum sellers. Analysis, the fccs proposal to score stations will not improve the efficiency of the auction unless the fcc somehow knows the secret reserve price in the mind of every participating broadcaster, which is obviously impossible, and unless the fcc just its scoring dynamically between every round of the auction, which would add enormous complexity to an already complex auction unless the fcc at just unless ts its scoring. Fred campbell, the former chief of the fccs wireless bureau, has conducted a thorough analysis of bidding restrictions in past auctions and concluded that they dramatically reduce revenue. Revenue needed in this auction to attract a sufficient number of tv spectrum sellers. If the fcc hopes to recover significant broadcast spectrum, it must permit and even encourage innovative tom outof thebox channel sharing proposals by tv stations. Stations should be free some senators expressed a concern that the incentive auction might interfere with broadcast services to rural viewers by translator stations. Coalition concluded that rule consumers would continue to have access to Translator Service after the incentive auction. The four stations can participate in the auction they need to know the starting level the prices the sec will offer and when they will be paid, and when they will be expected to cease broadcasting operations. The sooner they can make this Information Available the sooner more stations will be seriously able to evaluate auction participation. I want to reiterate the enormous respect and appreciation we have for the professionalism, dedication, and openness of the auction task force. Thank you. Mr. Kaplan. Good afternoon. Inviting me on behalf of the National Association of broadcasters to testify before you today. Chairmanike to commend wheeler on the decision to step back and take a deep breath, and appreciate the complexity of the incentive auction. He understands that there are a number of unresolved issues that are going to take more work before we can give ourselves the best chance for a successful auction. We believe there are at least three essential ingredients necessary to craft the auction. First, the sec should take Public Engagement to an all new level. Providing new information to the outside world and this can tell plan, orn the new band a series of hearings. Fcc must muchdirective is not as about broadcasters as it is about viewers. Your constituency rely on us for essential news and information. The notion is simple. , they should can send audits. Are many what are the effects of different policy decisions on the future of translators . This must be studied and understood by the fcc. Recognizingdership how critical it is to secure agreements with ended up in mexico. The auction will raise hundreds of millions if not well over a billion dollars. It will make repacking in the future of the band plan and possible. Thank you for the opportunity to be here today. I look forward to answering your questions. Thank you. Thank you for inviting me to testify. I have urged that a well structured auction could be a policy trifecta. This set ofn in frequencies. In addition to raising revenue for Public Safety network, the auction of licenses could also enhance competition to the benefit of consumers. In particular, rapid growth and development in the last year. The Gigabit Library Network is using white spaces and pilot programs to expand wifi into the local community. It seems that nearly every month brings an announcement of another new product or investment here and abroad. It last two years have shown the value of regulatory steps to promote competition. Regulatory intervention has led directly to billions of dollars of new investment and the resurgence of competition. Rival carriers are forced to become complacent duopoly to upgrade their networks. For the first time in years, consumers are saying innovation and pricing plans. All of this highlights the importance of getting the roles right. The department of justice has identified low band spectrum is critical. Companies looking to invest in unlicensed, such as comcast or google, has identified the broadcast band as critical to developing services. What does getting it right mean . We must not creating force false choices. Congress has a compromise bill that gave the fcc authority to enhance unlicensed. We should embrace the compromise. The priorities of the auction must work together, not push against each other. We should recognize the bands spectrum for unlicensed use and increase the value of the services of a whole. We need to make sure that we have enough anticipation in the auction to make it worth holding. The best way to make sure that enough debtors bidders show up, limit the number of licenses any one company can win. We need at t and verizon in the auction. I agree. Lets at tis that and verizon participate. It is consistent with what was was suggested. There are enough licenses to make it worthwhile for. Ompetitors to conclude, the key to successful auction is the balanced approach, and we get there through the deliberative process. We can achieve a winwinwin for unlicensed access and Public Safety. It would be a shame to miss this i fighting old battles instead of working together. Thank you, and i look forward to your questions. Thank you. We will do fiveminute rounds. Let me start with you. I would like to start with at t on this. That there were possibilities in your Opening Statement, this approach would at least ensure multiple winners. Any limits or parameters that might be imposed in a neutral fashion that you think your Company Support . Thank you, sir. Youre correct. We support and nonrestrictive auction. That form it will raise the most revenue. Given the regular targets in the auction, that has to be taken into consideration. What we have said it no such there is to be a limit, we think it has to be applied neutrally and fairly to all participants. There has been discussion of what those limits might look like. I think you have to take care because of those limits, you can undermine the efficiency of the spectrum. Every bidder must be able to get to a 10to allocation to be able to do deployment. Certainly if the goal is to ensure multiple winners, we think it should be a role that applies to all vendors in a neutral way. Let me dive in with you if i can. We have all talked about the consequences of this auction, both good and bad. What are the consequences for your members if they are not able to purchase any spectrum in the auction . For our competitive carriers, it would be a disaster. Sincee not had an auction the launching of the iphone. The data consumption by consumers goes up like a hockey stick. Our carriers need access to low band spectrum. It also reaches the inner sanctity of this hearing room and other building penetration. It is important to be able to serve customers and consumers in a way that they use their device. The way they use their devices inside and outside. It is difficult for members to build a network and stay competitive without access to the spectrum. I am encouraged by at t statement that Randall Stephenson made today, that there may be some rules and restrictions on how much spectrum anyone carrier could require an auction. Maybe we are making some. Rogress on finding solutions we need multiple winners for sure. One little bit of housekeeping. I said earlier that the rumor was we were going to surround for. We do have more time. They can give their full statements. [laughter] that was impressive. This is a good exercise for us. Singer, like you i believe that i do not believe anyone should be respected restricted from bidding. If regulators insist on going down the path of the spectrum caps, socalled cement spectrum caps would protect against possibility. Knowing that is not the ideal outcome for a marketbased auction, can you explain why this idea may nonetheless provide a middle ground on competing perspectives . Quite sure. Ive heard many arguments that have expressed the concern that many one better would gobble up the spectrum in the auction. If that is a concern that be addressed in less restrictive ways than the proposals that have been put out by tmobile and sprint. I actually do not think that one better has a very good chance of gobbling up the spectrum in light of good competition. If anyone is concerned about the contingency, a cap that hit all would mitigate that concern. Thank you. Agree that smaller geographic spectrum licenses contract more bidders to an auction. It may increase revenue. You mentioned in your testimony that it sold for much more than other blocks auctioned with larger license barriers. It is my understanding that they were reactive bidders for licenses. I question is, can you explain whent will reduce revenue their presence in the previous b block auction resulted in high returns . There was a lot of interest in the b block. Many members did come out of bed very high. If you look at the c block, it didnt receive as much revenue as a lower block of spectrum. I think what you have seen in our smaller geographic areas. The desire to bid, one of the larger carriers has block has bought the c block. The lower band brought over twice as much in terms of revenue. I think this is unusual in the sense that this is the first opportunity for greenfield spectrum. It may be the last opportunity we have in a decade. If small carriers are not having access, and not having an opportunity to bid without being purchased out from under them by the largest carriers, youre going to have a consolidation in the industry because you will not be able to compete as a small carrier without getting to a four g lte. In ofectrum is efficient itself. Especially in rural areas. One tower to cover the distance of four or five towers at a higher spectrum band. It is critical that our smaller carriers and every carrier has opportunity to get access to this. If youre owning 80 of the lower spectrum, it is a lot noncommittal about how much spectrum a small carrier should in fact be able to bid on. To you think that going back to the option, the b block would have sold for more of at t and verizon have not been bidding on those licenses . No, i do not think it would have sold for more if atg had not been bidding. We are not suggesting that at t and verizon not bid. I want them to bid. I want them to bid and every market in every opportunity because we get into the same ecosystem. We want handsets and devices. We want partners that have the same bands in their devices so we can roam and have partners to serve our customers. We want them to bid. I have never said we didnt want at t and verizon to bid. I just do not want them to be able to walk away with the entire pie. My time is expired. Senatorvolker booker. Thank you. First of all, this is exciting to me. I think there are a lot of ways we can be achieving here. Helping local broadcast affiliates make money, which is not a bad thing indeed. Area that we are not discussing that i wanted to pull out a little bit. There is Television White spaces that have begun to offer new and exciting access and innovation opportunities for our economy. It is unclear as to what will become of them after this auction. It has brought us incredible innovations from wifi, andooth, cordless phones wireless microphones to name a few. Now white space is near this auction is auctions range. These characteristics promise new innovations and access potential that excites me as im concerned with this disadvantaged populations. Were beginning to see the research in this space and how it is offering great opportunities for increased investment in technology. This will be hampered if there is uncertainty. I want to see these protected as we repack the spectrum. Really to start out, i was mayor of newark, and became concerned about the Digital Divide. There is a democratizing force going through our society that is allowing for folks to connect into using the internet opportunities we never once imagined. Access totarter, capital, many other things. I am concerned about this phenomenons role in the Digital Divide hampering social mobility and other things. The wall street journal ran an article about children needing to go to mcdonalds to get access to what they need to do for education. Assuming the statute would allow it, good Public Schools use tv white spaces to provide access to schoolchildren when schools are close, and other other Ways Technology can make wifi connectivity abundant instead of scarce . What are your concerns regarding the potential impact of this auction on those white spaces . Thank you. Yes. One of the most exciting things about the tv white spaces, as we have seen with other forms of unlicensed, once you make this available in start make this an equipment purchase, it really frees the potential and innovation. Many people, and this is the innovation van. Down at every level of society, we are looking at a world where through tv white spaces, you can have schools that connects stand r connectivity out into the neighborhood. Sight and even nonline of sight links connecting to peoples homes. Fi could follow your kid helps you could actually do homework at home and not at mcdonalds. I need to add that the fcc had a workshop in which we had representatives from a number of communities who pointed out that one of the biggest issues is getting knowledge of this resource out to minority entrepreneurs. Having them be informed of what is available, and the discovered once people make this discovery of what is available, it is just phenomenal to see how access to the resources and imagination allows for much greater participation for both Economic Opportunities in educational opportunities. It will not happen if people arent certain of what will happen in the space. Have remaining, what is at ts position on protecting unlicensed spectrum . Certainly it would be a lot of white spaces left in the 500 megahertz band. Given the distances that are necessary to separate broadcasters, you will see the continuation of white Space Availability through 500 grade we think unlicensed cap live in the 600 megahertz band. That direction was to build the guard band as technically necessary. And once those are built, consistent with technology requirements, at that point there is a possibility that unlicensed uses could live in a guard band. We want to make sure it is and create interference. Introducing interference into the band would be a big negative. Certainly we would be happy to consider any unlicensed uses that do not create interference. Thank you. Thank you. Senator markey. Likes thank you mr. Chairman. Spectrum is the oxygen of the wireless system. Parts of it are gasping for air. We are obviously having a discussion as this phenomenon unfolds. Time, we have to the various interests we have here. In 1993 when i was the chairman of the telecommuters committee was wehouse, what we did added in an auction of 200 megahertz of spectrum. They created the third, fourth, and fifth license in each market. , andncumbents were analog no one had a cell phone in their pocket because it was the size of a brick. By 1996, it had dropped to under . 10 a minute. Everyone stood to buy a device. Al of a sudden we had revolution that has everyone here today with one device in their pocket, but many have two. That is a change that took place. What we said at that time was we wanted to maximize revenues in the auctions for deficit reduction in 1993. We didnt want to do it at the expense of innovation and consumer protection. Think from a consumer perspective. It is not just deficit reduction. It is also what are the benefits for consumers in saving money and having more services. We have to think that part of it as well, in terms of who can build for what part of this new spectrum that is going to be out there to make sure we get it right to balance everything that we are trying to achieve, including innovation. Lets go to white spaces if we can, in terms of what that means. Talk about what white spaces can mean economically. We might not make as much money in the short term, but what inld happen in the long term terms of devices and applications, and other investments. I would like to say i do not think there is a conflict between taxa my xing auction revenue and being reasonable. Maximizing auction revenue and being reasonable. Congress looks at if you need to trade a couple of megahertz. Unlicensed as we have seen is generating enormous amounts of income throughout the value chain. We are seeing if it is a device , it creates new services and allows for the expansion of existing services. In rural communities, it is the method by which Broadband Access is available and customize as opposed to what is available for mobile use. It is the glue that binds together. You agree with that . The commissioners on record as agreeing with the tremendous benefits of the use of unlicensed spectrum. We are implementing as chairman prior and Ranking Member thune said it is quite clear under the statutory constraints that , theess put before Us Commission does believe in the benefits of unlicensed spectrum. Lamy ask you this. We have her concerns that as result of repacking, the tv stations have to upgrade their , and anders or towers a number of radio stations that currently colocate their have been may negatively impacted. What is the fcc going to do to deal with that issue across the country. The issue broadcaster transition is one that is complex. We spent a lot of time on it already. We a pardon outside consultant. We have had a number of different studies because we are concerned about your disruption and the ability of stations actually to make the transition with respect to location of towers and other matters. The transition will be complex and take some time. It is one we have to take into account. We are concerned about it. That station, we will make every effort. We are trying to tell you though, it is an important issue. Yes, sir. We want to do with the legitimate issues that each of you have raised. I think that as long as we listen to each of you and understand the engineering issues, and respectful of them, we will try to create a robust marketplace with many participants. Thank you mr. Chairman. Thank you for holding this hearing. Getsss its senator markey [indiscernible] i want to thank senator markey for his leadership in this area. When i was practicing regulatory law and involved in complicated rate hearings, i remember senator markey doing this for a long time. Im glad he is in the senate. I wanted to lead with one of the rural questions. Thank you for your support of the bill i introduced with senator fisher. I think you know that carriers need to be part of any solution to make sure that consumers no matter where they live or work are able to connect their families. How do you view this deal is . Omplimenting we do appreciate support what youre trying to do. You going to allow Smaller Service tod provide consumers in that area with highspeed lte service by being able to reclaim some spectrum that hereto for is not accessible. Could increase the flexibility, which are bill provides for, we can squeeze out more capability in the rural areas for spectrum that is desperately needed. I think your fellow and senator fishers bill is a great way to approach a real problem in a practical fashion. I am hoping that our members will deliver results for you. Thank you. We were done in minnesota during an ice storm where they lost all of their trees. All they wanted to talk about was how they did have cell phone service. You guys have been helpful in building out there. You could use cell phones in the middle of an emergency. I thank you for that. I have questions will put on the record for at ts work on making sure that rural customers will have the spectrum utilized to reach them in an auction. I want to move to Something Else that mr. Kaplan raised. Some of the concerns regarding spectrum coordination along the northern and southern borders. The fcc is handling it in fans of the auction. Where are they in the coordination efforts with canada and mexico . The commission is recognizing the root requirement to coordinate with mexico. We have had more than over the last six months technical meetings with canada. More recently with mexico, who has recently had a substantial change in both its constitutional and Statutory Foundation for its regulator, we are pretty pleased to report that both countries have publicly recognize the significant advantages of a canadaband plan with the aandpoint, and mexico in recent conference, has stated that. We have placed high priority upon these meetings. Technicalsome sort of solution with respect to canada and mexicos border, acting chairwoman clyburn made this such a highpriority. Help make a great breakthrough. Chairman wheeler has met with both canadian and mexican representatives. We have a strong charge to the International Bureau to push as quickly as we can because we recognize the need for certain teeth with respect to both the respect to the canadian border. Thank you. I know the broadcasters are very concerned about the methods the fcc is going to use to place monitoring value on the spectrum. How will the calculation methods the fcc uses impact the potential revenues of the auction as a whole . How will it impact the decisions of broadcasters who want to participate . At the fcc is buying six megahertz of spectrum. Theyre not buying broadcasting businesses. They propose to score stations based on some characteristic of their broadcasting operation. That doesnt have anything to do with what the fcc is buying. It is grading distressed among rod casters and driving away from the auction. As professor crampton discussed with the fcc last week, this scoring is not going to improve the efficiency unless somehow the fcc knows the bottom line in the mind of every broadcaster, which is impossible, and they changed their scoring between each round, which would at the complexity to the most complex procedure in the world. We think they should not score the station. They should hold a straight up auction. We think that is what the statute provides for. Like thank you. Thank you. I will followup on the record with the expense issue, which is important. Thank you very much and thank you for your work on this important talk. Thank you. Eligibility in the auction have any impact on your Coalition Members . Is that an area . Bidding restrictions . Yes. We take money from no carriers at all. We are entirely funded by broadcasters. We are pure as the driven snow. [laughter] at least somebody in here and say that. All we care about is maximizing the revenues generated by the forward auctions so that there is money to get the spectrum in the first place. I would note that most of the questions here have been about how to divide up the spectrum. Unless enough broadcasters come forward, there is not going to be any spectrum to divide up. You will not have to have fights over bidding restrictions because there will not be anything to bid on. To getk the fcc needs very serious about sharing information with stations, with the prices are going to be. Ive had a private i have had a house on the market for quite a while. We have a concrete how much . Start tellingto broadcasters what kind of price range theyre going to be looking at otherwise they will not get to participation. How was that price range going to be determined . The statute calls for an auction. The question is where the auctioneer begins. At the moment we have no information about that. With the amount of the auction go to the broadcaster that released that spectrum in total, or how would that be determined . Broadcasters can either release theres in total, or anease their spectrum sherry station with another station, or move to a vhf channel. One important fact, the fcc is only going to be buying spectrum in a limited number of markets. They are going to be getting the full auction revenue from every market in the country, which is going to give the fcc plenty of Financial Leverage to pay what they need to pay to get the broadcast stations in the few markets they need to buy them. Is there any understanding between the broadcasters and the fcc asked her how that price is going to be arrived at . At the moment, no. Senator, thank you. The construct that congress set up and we are a moment he is a reverse auction. That means you start time and you say how many you are in. How many will share your station. Down. T will take we have established a mechanism that will make it easy for broadcasters. All they have to know is when they want to stop out. Mr. Patton isthat talking about, what is the key price that we start to. Myractions instructions are as they stated. Dilma have the auction unless the broadcasters participate. We are looking mechanisms to start with a high reserve price not based on fair market value, but based on a potentially a number of different factors which the commission will have to determine, including things like price in auction. The key is to try broadcasters. The key is potentially to have an auction which is simple for broadcasters to use, and to start at an attractive price to make the auction a success. It is the key element to all of this work. Mr. Berry, are there things inside the spectrum that are going to relieve some of the , other the better towers things i do not understand . Are we going to constantly be needing to look for more space rather than better than use of the space we have . [inaudible] thank you. Peggy for the question. I would say over the past few decades, the capacity has been increased by technology. I fully expect technology to continue to move us forward. I think we are going to need additional spectrum throughout the United States. ,e are getting new technologies longterm Evolution Technology is going to increase speed. Sprint rolled out spark product, advanced lte. Theyre going to get speeds as much as 10 times higher. There is always that evolutionary impact to bring more speed and more capability to the network. On the spectrum you currently have, verizon Just Announced an opportunity to compress video over a broadband wireless, which is five times greater than what was available last month. We are going to see both. We definitely need spectrum and rural areas every going to stay up with the demand. Thank you. Senator blumenthal. Thank you for being here today. Complex, significant and fastchanging area. I know i share the frustration of many of my colleagues that can easily take five hours or longer. You may not welcome the opportunity. I speak with some email at t in the presence of senator markey, who has a longstanding involvement in this area. The spectrumgize and the entire service that you much as oxygen, but the blood supply. The blood supply carries oxygen to parts of the body, nutrients that are essential to our body working. I think more and more, the. Pectrum is that blood supply the American Public ought to understand how important it is. I have endorsed measures that would provide more access to spectrum. I believe strongly and i have written and use the oversight hearings to encourage the department of justice to totinue policies, and encourage the fcc to adopt policies that ensure smaller carriers have access to spectrum so they can provide competition and competitive discipline. Not for the sake of any company, but for the sake of people who benefit. I appreciate your concern about producing the best fiscal results. There is a large interest in my view that is really among the core profound interests that this committee can help serve. That chairman wheelers comments signals he agrees with the antitrust division of the department of , are an indication of his willingness to entertain some auction eligibility directives. I do not like the word restrictions as much as directions. Policyve to adopt approaches that really anchorage the Public Interest. That may not be neutral to everyone who was involved. That is the name of the process. But they should be fair. I am hoping, and im going to ask this question that the fcc will pursue a spectrum policy that best enables Competitive Forces to benefit consumers, and will adopt the department of justice recommendations, or the kinds of screens in caps that limit the amount of spectrum to anyone company can have, sadly so there can be more competition. Is that the direction you see him going . Senator, i do know that chairman wheelers has stated in the month that he is been here the his mantra is competition. He has stated numerous times. I know he has stated it. Can you demand that he is moving in that direction with screens or caps . I cant commit to what chairman wheeler will do in the future or any of my commissioners. I do know they take these arguments seriously. They look at interest of the statement of at t, and i know , the chairman has stated that the lender falls within department of justice because it is part of the administration. Something they look at with persuasive way. They also give persuasive way to the multiple other filings. There have been more filings on. His issue than anything else is that the kind of policy that you think at t could accept . What the fcc has policies in place that do look at spectrum aggregation for the purpose identified, to make sure no one carrier is ever getting more spectrum. We think that can be effective here. It has been effective, and it needs to be updated. Everybody needs to understand the rules of the road clearly. That tool in it of itself can be very effective. Waxman my time is expired. I think you my time has expired. I thank you. We have been joined by senator warner. The only member of the wireless hall of fame on this committee. Thank you for joining us today. Thank you for that courtesy. I apologize. We have our final Housing Finance committee today on legislation. My apologies. My apologies to my colleagues and witnesses because there is nothing worse than a man dropping at the last moment and asking questions that have already masked. Already been asked. I member of the wireless hall of fame. The only hall of fame i will ever be inducted into. I was hoping for the old white hall of famel designation as well, but i do not think that is going to come by. [laughter] there are a lot of directions we can go with that. Chairman, i know we have exhausted the topic already about spectrum caps and allocations. Im sure that has been thoroughly discussed with the committing. What i wanted to start with is bit on thegging a questions about how we get these auctions right. That chairman wheeler is probably right to move down this to 2015 to get this process set up the right way. E have one crack at this as we here Going Forward, not knowing completely with the , how we canmay be obtain additional spectrum, therewe desperately need, may be more budgetary constraints on it. About the reverse on other based factors, i want to talk about market variation. The deal would provided variation for uplink bands. Would recognize the difference between markets and. He volume broadcasters worry that interference issues here. Has been dealt with. If you could spend a couple of minutes talking about market variation as you think about this isons, could this the way rather than have a all rule that we would be able to maximize spectrum, but at the same time give the overall predictability. Onyou have other comments issues, i would love to hear them. You touched on an extremely important issue. What the commission would like to do is have a nationwide amount of spectrum. Which would be a good amount. Certain parts of the country, perhaps because of some of the inability to repack in the crowded northeast part of the United States, we may not be able to recover the core amount of spectrum in those areas. Therefore we felt it important from day one not to go to a least common denominator. Not to take the least amount of spectrum in every market that we can get in the least market. I think there has been some consensus, a controversial issue, but we think narrowing to a band plan which will take that into account. That raises certain complications. Convocations which the nab has worked to bring to our attention. In some markets, where you have more spectrum adjacent market where there is less action, you have to tion that potential of we cant have that. It would be a statutory violation. What we are working on is establishing socalled co channel interference standards and protections. It is again a balance. We do not want to be driven to the lease, denominator. At the same time, we know we have obligations of the Public Interest and under the statute to protect the different circumstances in different areas. That is the area we are looking towards going. My time expired. Raised,e has also been this back system to the definition of what is the geographic definition of the marketplace. How would take into account some of the carriers that do not have service. Quality courtesyappreciate the of letting me slip in late. We are going to do a second round for all the senators who want to stick around if they are able to. We ought to put you up there. You know as much about this as anyone of them. Circuit 2000. Nt mr. Epstein, this is going to be a sophisticated auction. You are going to have to put together a very sophisticated bidding platform to maximize the participation and protect the integrity of the information. So, can you tell us about the in the auctions Information Technology process . Yes. This is one of the key issues that chairman wheeler focused on from the day he walked into the door. We have been focusing on it for a long time. Because of his background in venture capital, he immediately focused on it. We have some of the best auction designs and Software People in the world working both on the thede and outside of contractors with us. That is not significant and are mine. That is one of the reasons that he thought a more realistic schedule for the auction was mid2015. It was for the reason of adequately testing the software that we are developing with respect to the auction. Some of the software we are using are things we have been doing for 1020 years already. We have had multiple forward auctions. Arehe reverse auction, we doing something which hasnt been done before. In the combination of both the reverse auction and the ford challenge, onea which we know we have to meet and make it right. We have to go inside testing, outside testing, and we have to have testing by the participants before we are willing to go ahead. You have also got to have confidence by all stakeholders in the process. Doing toare you maintain the transparency . We will have as we go forward with respect to the implementation of all of the software that is involved, the interference platforms, we have notice, public encouraged by the fact that broadcasters and other participants have looked at it carefully, and we will continue to be transparent there. Before we have this auction, we will make a mock auction. We will have the participants in there trying to stress test the actual software that gives dell before we go to actual market. Chairman, the newspapers have speculated on the fact that ,aybe spectrum would be sold would be a part of the revenues that would be produced for budget agreement. We havent had the budget agreement announced yet. That 10 this the in period they are looking . We do not know exactly what the budget deal is. Certainly, in this budget environment that we are in, there are people looking for revenue. Theyre looking for anywhere they can get it. It is possible. This may not be the last item auction. You guys are working on this one feverishly, but there is more to come. Do you have any more other questions . I want to thank all of the witness for being here. Mr. Kaplan, let me just thank the broadcasters for their ongoing role. Thank you very much for that. A questionllowup to that senator clover sure had asked about. That is thinking about New Hampshire as a border state. It is in the unique position. I can understand minnesota being in a similar situation. When it comes to the incentive auction, because of the need to coordinate with canada, we are in a position similar to minnesota in that regard. Beyond the impact in New Hampshire, which i have weighed in on with the sec, what are the consequences to the repacking process and ultimately auction revenues if International Coordination is delayed in substantial part until after the auction . Thank you for your leadership on this issue. Biscuits back to the conversation before this gets back to the conversation before. Were not just talking with the most northern or southern border. We are talking about the entire state of New Hampshire. Those stations cannot be repacked without an agreement with canada and mexico. The current processes 35 days at a minimum. A broadcaster standpoint, and from an auction revenue standpoint, from a creating a best possible less standpoint, we think we are unique. Exactly. The fcc needs to take this time to get those agreements done. It allows you to auction off the band as a whole. The other thing that people do not talk about is that it is hard to have repacking. Some might say that we repacked , and repacked New Hampshire later. That is difficult. Once you squeeze us together, there is no way for the stations to come down anymore. Once we do that repacking, it doesnt work. It has to be a repacking solution. It has to last for two years and expect that New Hampshire may repack later. Thank you for that answer. Ms. Marsh, i wanted to ask you, i am pleased with dod and the fcc announced an agreement to 1780 megahertz band ready for auction. , serving oncenes the Armed Services committee, energy the party gettogether to take action that protects dods action. We know we need to get this band in particular out auction. What is your perspective on this process, and are you confident that commercializing the bactrim is moving in the right direction . Are we seeing a moving forward process that is going to get us the result we need . This work is really important. This band could free up 25 megahertz of spectrum which would be very useful in the Wireless Industry. The process has been a challenging one. The number of Different Services that are in 1755 and 1780, we have been encouraged by recent successes and progress made. Areink all of the agencies all working together productively on this band right now to try to bring it to auction within the statutory requirements, which requires they be reallocated by 2015. Yes, we are encouraged by the progress made. Good. It sat around here for a long time. We knew that it needed to be done. There was no impetus to move it forward. Im kurds to hear that. I wanted im encouraged to hear that. That no oneagree has been critical of the decisions, and we need to make sure we go for a get these issues resolved. Has the tools fcc and expertise that it needs to design the auction in a way that can ask him eyes revenue and that can maximize revenue . Believebelieve, first i i applaud chairman wheeler saying we are going to do this right. What we need is transparency around the scheduling, and certainty with regard to when we do what hasright to happened. I think the announcement does all of that. Fcc resources, the fcc has led the this has attracted interest from experts. I think that the one thing we need to be sensitive to is cc has the money that it needs to buy the equipment that needs. We would encourage the agency not to be shy. The auction revenue can be used after the fact. Softwareto build
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