In re:
Mandatory Reimbursement Rules for  )
Frequency Band or Geographic       )
Relocation of Federal Spectrum-    ) Docket No.
Dependent Systems                  ) 001206341-0341-01
 

Reply Comments of the Secretary of Defense

The Secretary of Defense hereby submits these reply comments in the above captioned proceeding.

Eight parties in addition to the Department of Defense (DOD) filed comments. Most of the comments may be divided generally into two areas, reimbursable costs and frequency sharing.

I. Reimbursable Costs

A. DOD will provide the most accurate estimates available.

Several parties assert that the Federal entities must provide more pre-auction information on costs than that specified in the rules proposed by the National Telecommunications and Information Agency (NTIA) in this proceeding, especially for classified systems. For those systems, it is suggested that properly cleared individuals could be allowed more detailed information than that now proposed. The implication is that having more pre-auction information might lessen the need for post-auction negotiations. The proposed rules provide for a single, consolidated and unclassified cost figure to NTIA which is in accord with law and regulation. No changes are necessary. Post-auction negotiations may be available under proper conditions and could be used to convey any necessary additional information. DOD notes that para 44 of the Notice of Proposed Rulemaking (NPRM) states that successful bidders may apply for a facility clearance pursuant to the National Industrial Security Program Operating Manual and for related individual security clearances. If those clearances and accesses are granted, the successful bidder may be provided with classified information, as necessary to reach resolution with affected federal entities on reimbursable costs. DOD believes that this approach strikes a reasonable balance between national security interests and a successful bidder’s commercial interests.

For unclassified systems, some commenters (Securicor, AT&T Wireless and Cingular) have requested additional information including longitude and latitude, amount and type of equipment used and to be replaced, age of equipment, number of towers to be replaced, more precise geographic area information, etc. DOD believes that NTIA's proposed rules, which set forth broad categories of information, are adequate. DOD systems are unique and a general mandate of more information will not be helpful. DOD will attempt to present information relating to its systems in a fashion meaningful to potential bidders and feels it can do more to reach that result on a case-by-case basis.

B. Arbitrary Caps are not contemplated by the statute and will not yield Total Cost

Securicor and Mobex Communications, Inc. (Mobex) suggest a cap on relocation expenses. Mobex states that NTIA proposes to establish a Relocation Cost Cap beyond which a non-Federal licensee would not be required to compensate a Federal user for frequency relocation. It asks that a cap also be established for any effort to reclaim a frequency. DOD is unable to locate any rule or discussion regarding a Relocation Cost Cap in the NTIA rulemaking. To the contrary NTIA states "These proposed rules have been developed to ensure that the Federal Government is fully reimbursed for the expenses it incurs in retuning, modifying or relocating a system as a result of reallocation." The Act does not authorize a cap on relocation costs or on the right to reclaim.

Securicor asks that the pre-auction estimates of marginal cost be used as the cap on relocation costs. The pre-auction submission of marginal costs is an estimate only. The statute uses the phrases "marginal costs anticipated" and "estimated relocation or modification costs." Good faith estimates can be low or high and circumstances can change. There is no suggestion in the statute that estimates cannot be modified post-auction, and NTIA has correctly not made any such proposal.

Moreover, an arbitrary cap, pre or post-auction, would not comport with the requirement that the petition to relocate guarantee "all relocation costs."

C. Net Present Value and other issues.

Securicor raises three additional cost issues. It wants costs to be limited to the costs of comparable facilities, costs to be supported and documented, and for reimbursable recurring costs to be prepaid on a "net present value" basis. NTIA’s proposed definition of marginal costs already limits costs to the achievement of comparable capability of systems and DOD's estimates of marginal costs will be supported and documented.

The use of the "net present value" of future recurring costs to be paid in advance as part of the petition for relocation process is not authorized by law. As discussed in our comments filed on April 10, 2001, (pp.14-15) the Act requires the reimbursement of actual costs. Thus, payment of "net present value" would not comply with the law. Moreover, DOD does not have authority to invest the prepayment and use the proceeds in a later fiscal year.

Mobex would have the Federal entities present their cost data to NTIA 30 days after the effective date of the rules. First, this statement ignores that these rules are to be effective not only with respect to spectrum presently under consideration in the Federal Communications Commission’s (FCC) 27 MHz proceeding (Reallocation of 27 MHz of Spectrum, ET Docket 00-221, FCC 00-39,5 66 FR 7443, January 23, 2001) and with respect to 1710-1755 MHz in the FCC’s NPRM, "New Advanced Wireless Services" ET Docket No. 00-258, FCC 00-455, 66 FR 7438, January 23, 2001 but also with respect to potential future reallocation actions. Second, while the Department of Defense has already initiated efforts with respect to determining the marginal costs for the spectrum at issue in the two aforementioned proceedings, 30 days will not be sufficient for DOD to develop marginal costs. Developing marginal costs is a complex undertaking and, for the costs to be as accurate as possible, it is important for the costs to be developed as close to the auction date as is feasible. It must also be noted that, in some circumstances, identification of possible replacement spectrum will be a condition precedent for estimation of marginal costs to relocate. A determination of marginal cost to relocate federal government systems without knowing where to relocate those systems, i.e. without comparable spectrum, is simply not realistic. Shortening the proposed time frames is not feasible.

II. Frequency Sharing

Securicor suggests that sharing be mandatory, at the option of the auction winner. AT&T agrees with Securicor. Motorola believes sharing should be facilitated, but that as there would be no relocation, the private entity should bear no costs.

As discussed in its comments, DOD believes that in bands allocated for mixed Federal and non-Federal use where sharing is legally permissible and a viable technical option, one that will "…ensure that the Federal government station is able to successfully accomplish its purpose," it must be permitted. Comparable capabilities that restore the operational capabilities of the original facilities are key. DOD systems are critical to our nation's security. The NPRM discusses the importance of operational capability in determining availability of a comparable facility. Moreover, DOD’s initial comments highlight the complexity of certain DOD systems (DOD Comments, pages 8-11.) Only the federal entity can assess whether the requirement of a comparable facility has been met. Thus, it is not possible to give a private entity the final decision on whether a DOD system operating in a shared environment is a comparable facility. It is also not possible to give a private party a veto if DOD has determined that less costly sharing meets national security needs.

III. Additional Issues

Several comments address issues that do not fit neatly into either reimbursable costs or frequency sharing.

A. A longer period for the Auction Winner to contact the Incumbent Federal Entity would delay and disrupt relocation or sharing planning.

Securicor wants the proposed NTIA rules to allow one year (instead of the proposed 30 days) for the auction winner to contact the incumbent Federal entity. Securicor states it "…believes that the 30-day period is an insufficient amount of time for an auction winner to fully appreciate whether it should relocate the incumbent operations." (Securicor Comments, page 2.) Securicor is apparently concerned that the auction winner might not ultimately qualify for FCC licensing in the new spectrum. Securicor wants a one-year period to notify Federal entities of intent to relocate. Securicor is incorrect in its assumption that the winning bidder decides whether relocation is required. Moreover, its proposal would stall the entire process and would be unworkable.

B. Arbitration is not available to resolve disputes with the incumbent Federal Entity.

The American Arbitration Association submitted comments that generally describe arbitration as a good way to resolve disputes. DOD supports NTIA’s proposal that parties that do not reach agreement be required to enter into non-binding arbitration, as set forth in the NPRM. To the extent the comments propose binding arbitration as a solution, DOD notes that, at this time, it cannot engage in binding arbitration.

Conclusion

Spectrum issues do not lend themselves to easy solutions. Mandatory cost reimbursement for relocation is especially difficult to implement. Reasonable minds can and will differ on the best approach. NTIA and affected federal entities, including DOD, must be granted deference in determining how best to preserve the capabilities of those systems upon which the federal agencies rely. The DOD continues to support NTIA’s efforts to promulgate cost reimbursement regulations that effectively balance the needs and requirements of federal users with those of potential and actual bidders.

Respectfully submitted,

CARL WAYNE SMITH
General Counsel
 

PAUL R. SCHWEDLER
Deputy General Counsel,
Regulatory & International Law
Code RGC
701 S. Courthouse Road
Arlington, VA 22204
(703) 607-6092
 

CERTIFICATE OF SERVICE

I hereby certify that a copy of the foregoing "Reply Comments of the Secretary of Defense" were sent via first class mail, postage prepaid, this 30th day of May, 2001 to the following:

George Sakai
Director, Office of Spectrum Policy
And Management
ASR-1
Federal Aviation Administration
800 Independence Avenue S.W.
Washington, D.C. 20591

Douglas I. Brandon
David P. Wye
AT&T Wireless Services, Inc.
1150 Connecticut Avenue, N.W.
Washington, D.C. 20036

Howard J. Symons
Sara F. Leibman
Catherine Carroll
701 Pennsylvania Avenue, N.W.
Suite 900
Washington, D.C. 20004

Richard C. Barth
Steve Sharkey
Motorola, Inc.
1350 I Street, N.W.
Washington, D.C. 20005

JR Carbonell
Carol L. Tucker
Cingular Wireless, llc
5565 Glenridge Connector
Suite 1700
Atlanta, GA 30342

Robert L. Hoggarth
Harold Salters
Personal Communications Industry Assn.
500 Montgomery Street, Suite 700
Alexandria, VA 22314-1561

Robert B. Kelly
Scott A. Mackoul
Securicor Wireless Holdings
Squire, Sanders & Dempsey L.L.P.
1202 Pennsylvania Ave. N.W.
PO Box 407
Washington, D.C. 20044-0407

Dennis C. Brown
MOBEX Communications, Inc.
126/B North Bedford Street
Arlington, VA 22201

S. Pierre Paret
American Arbitration Association
600 Pennsylvania Ave. N.W., Suite 700
Washington, D.C. 20004-2676

Laura L. Smith, Esq.
International Telecommunications Association, Inc.
1100 N. Glebe Road, Suite 500
Arlington, VA 22201

Greg P. Skall
Counsel for MicroTrax
Pepper & Corazzini
1776 K Street, NW, Suite 200
Washington, D.C. 20006
 
 
 

____________________________

Paul R. Schwedler

NTIA Notice of Proposed Rulemaking, paragraph 9.

47 U.S.C. 923(g)(1)(A)

47 U.S.C. 923 (g)(2)(C)

"…Any such Federal entity which proposes to so relocate…" 47 U.S.C. 923 (g)(1)(A)