Commiioner Pai Statement, Hearing on Broadband Spectrum Law

STATEMENT OF AJIT PAI

COMMISSIONER, FEDERAL COMMUNICATIONS COMMISSION

HEARING BEFORE THE SUBCOMMITTEE ON COMMUNICATIONS AND

TECHNOLOGY OF THE UNTED STATES HOUSE OF REPRESENTATIVES

COMMITTEE ON ENERGY AND COMMERCE

KEEPING THE NEW BROADBAND SPECTRUM LAW ON TRACK

DECEMBER 12, 2012

Chairman Walden, Ranking Member Eshoo, and Members of the Subcommittee, it is a

privilege to appear before you today. The Spectrum Act originated in the efforts of this

Subcommittee and was the result of bipartisan leadership, hard work, and compromise by you

and many other dedicated Members of Congress. You deserve great credit for the passage of this

historic legislation.

I began my term at the Federal Communications Commission just a few months after

Congress passed the Spectrum Act, and thus a large part of my time at the agency has been spent

evaluating and implementing the responsibilities that Congress entrusted to us in the statute.

The Commission's primary charge in this regard is to release additional spectrum into the

commercial marketplace to address the looming spectrum crunch. As an advocate of an all-of-

the-above approach to spectrum policy, I have happily embraced the challenge.

When it comes to FCC implementation of the Spectrum Act, two factors counsel in favor

of prompt action. First, consumers are adopting devices like data-hungry smartphones and

tablets operating on 4G LTE networks that are straining the capacity of the airwaves. More

spectrum is needed to meet this demand. Second, the broadcast incentive auction is our best

opportunity to push a large amount of spectrum well-suited for mobile broadband into the

commercial marketplace. Accordingly, this past summer, I called for the FCC to commence the

incentive auction rulemaking process in the fall. To his credit, Chairman Genachowski launched

a timely proceeding in September, and I thank him for that.

As the Commission moves forward, I believe that four principles should animate our

work. First, we must be faithful to the statute. It is our job to implement this legislation, not to

rewrite it to conform to our policy preferences. Second, we must be fair to all stakeholders. This

is especially important because the incentive auction will fail unless both broadcasters and

wireless carriers choose to participate. Third, we must keep our rules as simple as possible. The

broadcast incentive auction is inherently complicated; unnecessary complexities are likely to

deter participation. And fourth, we need to complete this proceeding in a reasonable timeframe.

I believe that we should set a deadline for conducting these auctions no later than June 30, 2014.

I am optimistic that fidelity to these principles will result in a successful broadcast incentive

auction.

That said, I do have some concerns with the direction of our proceeding. Most notably,

September's Notice of Proposed Rulemaking appears to envision an auction that will yield no net

revenues. That would mean no money for the First Responder Network Authority (FirstNet) to

build out a nationwide, interoperable public safety broadband network; no money for state and

local first responders; no money for public safety research; no money for deficit reduction; and

no money for next-generation 911 implementation. The Spectrum Act mentions each of these

items, which makes it difficult to square that legislation with an auction that would provide no

funding for them.

Most of the problem stems from the structure of the proposed auction. The only closing

condition set forth in the NPRM is that the revenues from the forward auction must cover the

costs of the reverse auction.1 I do not believe that this closing condition is sufficient since it is

essentially like ending a traditional auction as soon as the reserve price is met.

Another part of the problem derives from limits the Commission might place on auction

participation. We need robust participation from television broadcasters, current wireless

operators, and new entrants. The more people at the party, so to speak, the better the party will

be. But if the Commission preemptively tells broadcasters You may bid this high, but no

higher,2 many may not show up for the reverse auction. And if the Commission starts picking

and choosing who may participate in the forward auctionsuch as by setting a spectrum cap or

narrowing the spectrum screen despite the robust competition in the wireless market3it will

result in less participation, less revenue, less spectrum available for mobile broadband, and less

funding for public safety.

It's worth exploring a bit further the implication of the last item I mentioned. Ensuring

interoperable public safety communications has been a national priority for over a decade.

Indeed, the 9/11 Commission identified the lack of interoperability as a serious hole in our

nation's public safety communications and demanded that it be addressed.4 Given the

importance of constructing an interoperable public safety network, as well as the need to reduce

the deficit and fund next-generation 911, I believe the FCC must seek to maximize the net

revenues obtained through the commercial broadcast incentive auction.

We have yet to hear from the public about the Commission's proposed structure for that

auction. But I hope that commenters will point us in the right direction. I also look forward to

continuing to receive input from Congress, particularly Members of the Subcommittee. Given

your key role in crafting this legislation, it is vital that the Commission keep open the lines of

communication with you.

Aside from the broadcast incentive auction, the Spectrum Act sets several additional

targets for getting more spectrum to market. An im

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