Assistant Secretary for Communications and Information
U.S. Department of Commerce
AEI-Brookings Joint Center for Regulatory Studies
Practical Steps to Spectrum Markets
November 9, 2001
Good afternoon. It is my pleasure to join you today as the grand finale of your conference on "Practical Steps to Spectrum Markets." I want to commend Tom Hazlett, Greg Rosston and all of you at the AEI-Brookings Joint Center for Regulatory Studies for organizing this event. If I know Tom and Greg, you have enjoyed a full morning of creative ideas for unleashing spectrum use from its current regulatory shackles. Both of these guys are well know for their advocacy of free market spectrum policies. In fact, there's a rumor that they are trying to convince EBay to post the entire Table of Allocations on the web for shadow auctions!!!
In contrast, I am here as the bureaucrat responsible for government spectrum management. Candidly, I felt a bit like Little Red Riding Hood getting a suspicious dinner invitation when I received their request for a visit! I hope I will only get to see "big ears," but, no "big teeth" from them today!
In all seriousness, I am truly honored to be your guest. I have the greatest respect for the ideas, debates and thoughtful analytical contributions that your organizations bring to the spectrum policy deliberations. We do need "out of the box" thinking and critical examination of our approach to managing our country's spectrum. Now, more than ever, we are feeling the pinch of the finite-ness of this precious and much-in-demand resource.
As many of you know, the Bush Administration is a believer that new technologies and the deployment of new networks are crucial to America's economic growth and our citizens' well-being. In my brief three month tenure as the head of NTIA, spectrum issues have been at the forefront of my priorities, and, the object of my personal attention. I have challenged my staff to rethink how business is being done, and, I have personally visited NTIA's engineers at our Boulder facility to begin exploring how their expertise can be best brought to bear on challenging technical issues.
I definitely want to thank the conference sponsors for putting the word "practical" into the title. I don't know whether this word choice was pure happenstance or by design, but practicality is crucial to effective spectrum management policy. Spectrum policy must recognize that it is not practical to try to anticipate consumer demand or technological development - policies should be flexible to allow service growth and evolution. Spectrum policy must recognize the practicalities of running a business - certainty and predictability of regulation is essential to a company's ability to grow and succeed. Spectrum policy must recognize the practicality of limited government resources that cannot respond as quickly as the market - policies and requirements that are not necessary should not be imposed or should be eliminated if they exist. And finally, spectrum policy must recognize the practicalities of current spectrum use and the difficulties of changing the hand that you've been dealt. This doesn't mean you shouldn't be bold and aggressive in pursuing new and creative ideas for spectrum management. But, it does mean that, in doing so, you have the added challenge of figuring out how to transition from the current plan to any new spectrum management approach - and whether the benefits of such a transition outweigh the costs.
Cutting My Teeth on Practical Problems - 3G. I have already had the "fun" of cutting my teeth on some practical spectrum management problems. As the new kid on the spectrum block, I was promptly tossed into the spectrum briar patch of 3G. It's a classic study of real world practicalities colliding with simple policy goals. My mission is to find spectrum (including, and some might say especially, government spectrum) that might be made available for next generation commercial mobile services. This involves a number of practical challenges: (1) a process for bridging the bifurcation of spectrum management responsibility between the FCC and NTIA; (2) a process for evaluating the viability of sharing government spectrum with commercial uses; (3) a process for finding a suitable new home and migration path for government uses if relocation or "band clearing" is used; (4) a mechanism for addressing the costs of spectrum sharing or relocation; (5) the match up of government spectrum opportunities with global and FCC allocation decisions; and, (6) ensuring that Department of Defense and Home Land Security needs are addressed. And that's just for openers!
Let me provide you with a brief update on how we are trying to address the practical problems of 3G. To paraphrase Mark Twain, the rumors of 3G's death are greatly exaggerated. There is no question that the events of 9 - 11 have impacted the process. Nonetheless, work is proceeding. As many of you know, on October 5th, we announced that NTIA, FCC, DOD and the other Executive branch agencies involved in the 3G debate had agreed to a plan for conducting an assessment  of the viability of making certain identified spectrum available for 3G services. The assessment will focus on the 1710-1770 and 2110-2170 MHZ bands by NTIA and the FCC, respectively. This narrowed focus reflects a realization of the practicalities of the time frame within which spectrum needs to be made available, and the limited resources available to participate in the assessment in the near term. We expect to complete this assessment by the late spring. It will allow us to determine what the next moves are with respect to a 3G allocation.
Practical Initial Steps Toward Greater Reliance Upon the Marketplace. In the few short months of my tenure, this concept of practicality in spectrum management has also arisen with respect to limitations on existing spectrum allocations. The practicality here is that if the policies are no longer needed, get rid of them and let marketplace forces work. This is why the Administration supported immediate repeal  of the spectrum cap. As you know, Secretary Evans and I communicated our strong views that the cap had outlived its usefulness, and, that the regulation was serving to impede, rather than protect, the interests of the public. Busy wireless dial tones in congested markets are not in anyone's interest, particularly in times of emergency and crisis.
Yesterday, the FCC moved down the path toward elimination of the cap. The Commission opted for a transition plan that raises the cap by 10 MHZ to a level of 55 MHZ in metropolitan areas (making it equivalent to the 55 MHZ now allowed in rural areas), and sunsets the cap completely by January 1st of 2003. The Commission also repealed, in metropolitan areas only, the rule that prevents one cellular carrier from having an interest in the other in its market. While the Commission stopped short of complete and immediate repeal, Chairman Powell and his colleagues are to be applauded for establishing a glide path to reliance upon the marketplace rather than upon regulatory fiat, and for recognizing that so-called "bright line" rules are often over-inclusive and not in the public interest. That glide path will bring us where we should be. Although as far as I'm concerned, January 1st, 2003 can't get here soon enough!
The FCC also has an opportunity to move another step toward increased reliance upon market forces in its "secondary markets" proceeding. The Commission has proposed going beyond established partitioning and disaggegation policies to afford broad flexibility on how spectrum can be "sublet" or used by "third parties." This docket could lead to permissive policies that open the door to flexibility, innovation and more efficient utilization of radio spectrum.
Practical Initial Steps Toward Global Planning. Practicality also has been the Administration's guide in coordinating the United States' approach to international spectrum issues. Historically, all U.S. international spectrum planning has been divided into three parts: NTIA, FCC and State Department. This tripartite structure (or three-headed monster, if you prefer) obviously lends itself to coordination problems as well as to localized turf wars. The key is to ensuring smooth interactions rather than the breakdown of roles and relationships.
As preliminary practical steps toward improved U.S. planning, FCC Chairman Powell, the State Department's David Gross and I have been working hard to establish a team approach. This team approach must start at the top and permeate down through all levels of our respective organizations. The staffs of NTIA, FCC and the State Department have been meeting regularly to coordinate strategy and the goals for international outreach. The three agencies are committed to working together to present a unified front and coordinated message to other countries.
Practical Initiatives to Tackle Spectrum Management Challenges. But clearly the reason we're all gathered here today is a growing concern that perhaps our general spectrum management policies are outdated and in need of review. Is the current spectrum allocation approach based upon use too constricting and impractical for today's spectrum environment? Should a more free-market approach be used? Should licensees be granted full property rights in their spectrum? These are all intriguing questions that should be fully discussed and considered. We at NTIA are committed to a comprehensive review of spectrum management policies in an effort to find practical and appropriate solutions.
To kick off this effort, I will be convening a Spectrum Summit early next year to solicit out-of-the-box ideas as well as practical concerns of American service providers, private and public safety users, and, most importantly, consumers. This will be the first step in a long term effort to tackle and address the many complex issues inherent in spectrum management policy. Those issues include the merits and details of market-based management, property or other rights, spectrum flexibility, trading, auction theory and design, and "commons approaches."
The issues multiply rapidly. For example, where and how far can market-based management be adopted? Many have called for such management in the spirit of economist Ronald Coase, but how far can we go? Should licensees be awarded full property rights? Is it fair for current license holders to get greater, more valuable rights than they initially were granted? Can rights be defined clearly enough so that a market for trading bandwidth can be created? Will reform along these lines encourage innovation and meet other spectrum management goals? How, if at all, can market-based approaches be applied to improve the management of government spectrum?
What about auctions? The FCC has used auctions to award licenses since 1994, and they have clearly improved the licensing process. But, are they the answer to all spectrum problems? Under current law, auctions may be used only for awarding licenses. Yet, some would use them more broadly, such as for allocation; others oppose that approach. Also, how does the potential for enormous revenue distort spectrum allocation decisions? How do auctions affect decisions regarding spectrum for public services, such as public safety and national defense?
A lot of people also have proposed a "commons approach" to spectrum management, in which parties share spectrum extensively along the model of the Internet. Is a commons approach the polar opposite of a rights-based approach, or are they simply variations on the theme of increased reliance on the market?
These are all very interesting questions in need of in-depth exploration. We at NTIA expect to begin that exploration at our Spectrum Summit. So you advocates of spectrum management principles should sign up early. We will want to hear about property rights, spectrum trading, auction theories, "commons approaches," and any other framework you might choose to put on the table. At our Summit, we hope to explore these various theoretical approaches while also keeping an eye on what's practical.
A Demain - Not Au Revoir. This is just the beginning of our dialogue on practical solution and policy formulation. So let me close by saying "until tomorrow" rather than "good by." I trust that we will be seeing each other often in the future as we work toward the common goal of ensuring the best system and best services for our country.