97-218 SPR
CRS Report for Congress
Received through the CRS Web
Radiofrequency Spectrum Management
Updated April 23, 1998
Richard M. Nunno
Analyst in Information Technology
Science, Technology, and Medicine Division
Congressional Research Service ˜ The Library of Congress

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Radiofrequency Spectrum Management
Summary
The radio spectrum, a limited and valuable resource, is used for all forms of
wireless communications including cellular telephony, paging, personal
communications service, radio and television broadcast, telephone radio relay,
aeronautical and maritime radio navigation, and satellite command and control.
The federal government manages the spectrum to maximize efficiency in its use
and to prevent interference among spectrum users. The National
Telecommunications and Information Administration (NTIA) manages all spectrum
used by the federal government and the Federal Communications Commission (FCC)
manages all non-federal spectrum.
For several years, the FCC has been using auctions to distribute certain
commercial spectrum licenses, instead of providing the licenses for free, raising over
$23 billion for the federal treasury. By most assessments, auctions are considered
more effective than previously used spectrum licensing methods, both in terms of the
speed with which licenses are distributed and the revenue that can be raised. The
FCC plans to continue conducting auctions, and Congress is considering giving the
FCC authority to conduct auctions for other commercially used spectrum. As radio
technology improves, higher frequencies may become available and spectrum may
be utilized more efficiently, and demand for wireless services may increase. The
Balanced Budget Act of 1997 (P.L. 105-33) contains spectrum management
provisions to raise an estimated $21.4 billion by FY2002.
Potential and ongoing issues related to the new system of spectrum management
are likely to continue to come to congressional attention for the remainder of the
105 Congress, including:
th
! the allocation of spectrum for federal vs. commercial use,
! the spectrum needs of intelligent transportation systems
! options for planning the transition to digital television,
! whether to set standards for interoperability of wireless devices,
! plans to provide spectrum for public safety services,
! congressional committee jurisdiction,
! various problems with auction procedures, and
! plans to auction broadcast licenses.
The fervor for auctions has decreased markedly over the past year, possibly due
to decreased fiscal pressures, the perception that future auctions are not likely to
produce the revenue that earlier auctions produced, and the possibility of obtaining
federal revenue from other sources such as tobacco taxation.

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Contents
Spectrum Basics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Uses of the Radio Spectrum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Commercial Voice and Data Transmission Services . . . . . . . . . . . . . . . . . . 3
Commercial Broadcast Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Management of the Radio Spectrum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Using Auctions to Manage the Spectrum . . . . . . . . . . . . . . . . . . . . . . . . . . 6
LMDS Auction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Planned Future Auctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Additional IVDS licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
220 MHz Band . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
General Wireless Communications Services (GWCS) . . . . . . . . . . . . 11
Technology Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Spectrum Flexibility, Overlay Licenses, and Other New Provisions . . . . . . 12
The Balanced Budget Act of 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Spectrum Issues for Congressional Consideration . . . . . . . . . . . . . . . . . . . . . . 16
Allocation of Spectrum for Federal vs. Commercial Use . . . . . . . . . . . . . 16
Spectrum Needs of Intelligent Transportation Systems . . . . . . . . . . . . . . . 17
Digital Television Spectrum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Interoperability Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Public Safety Spectrum Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Committee Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Problems With Auction Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
C-Block Auction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
800 MHZ SMR Auction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Incidents of Collusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
FCC Recommendations to Congress and Adoption of New Auction
Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Auctions for Broadcast Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Other Spectrum-Related Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
List of Figures
Figure 1 The Electromagnetic Spectrum . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Figure 2 Frequency vs. Wavelength . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
List of Tables
Table 1: Licenses Auctioned to Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

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Radiofrequency Spectrum Management
The radiofrequency spectrum, a limited and valuable resource, is used for all
forms of wireless communication, including cellular telephony, radio and television
broadcast, telephone radio relay, aeronautical and maritime radio navigation, and
satellite command and control. This report provides an overview of the
radiofrequency spectrum (or simply the spectrum) including definitions of commonly
used terms, a summary of commercial services the spectrum, and a discussion of
federal policies for managing the spectrum. In recent years, the federal government
has used auctions to distribute commercial spectrum licenses, raising over $22
billion, instead of providing them for free. This report discusses the current issues
related to this new system of spectrum management.
Spectrum Basics
To discuss spectrum management, some basic definitions must first be
explained. Electromagnetic radiation is the propagation of energy that travels
through space in the form of waves. The most familiar form is light, called the
visible spectrum. The radiofrequency spectrum is the portion of electromagnetic
spectrum that carries radio waves. Figure 1 shows the radio spectrum as part of the
electromagnetic spectrum. Wavelength is the distance a wave takes to complete one
cycle. Frequency is the number of waves traveling by a given point per unit of time,
measured in cycles per second, or hertz (Hz).
1
Bandwidth is the portion of the
spectrum that a given telecommunications system can use. Thus a system that
operates on frequencies between 150 and 200 MHZ has a bandwidth of 50 MHZ.
The relationship between frequency and wavelength is depicted in Figure 2.
Figure 1 The Electromagnetic Spectrum
1 Radiofrequency is usually measured in kilohertz (kHz), which is thousands of hertz,
megahertz (MHZ) which is millions of hertz, and gigahertz (GHz) which is billions of hertz.

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CRS-2
An important distinction in
spectrum technology is the
difference between narrowband
and broadband. Narrowband
signals have a smaller bandwidth
(on the order of kHz) and are used
for limited services such as paging
and low-speed data transmission.
Broadband signals have a large
bandwidth (on the order of MHZ)
and can support many advanced
telecommunications services such
as high-speed data and video
transmission. The precise Figure 2 Frequency vs. Wavelength
dividing line between broadband
and narrowband is not always clear, and changes as technology evolves.
Another set of important terms is analog and digital. In analog signal
transmissions, information (sound, video, or data) travels in a continuous wave
whose strength and frequency vary directly with a changing physical quantity at the
source. In digital signals, information is converted to ones and zeros which are
formatted and sent as electrical impulses. Advantages of using digital signals include
greater accuracy, reduction in noise (unwanted signals) and greater capacity for
sending information.2
Electromagnetic waves propagate outward in all directions. Antennas are used
for transmitting and receiving signals and are designed and directed toward each
other to maximize signal reception. However, the receiving antenna may still detect
unintended signals that can interfere with the reception of the information sent. To
avoid signal interference problems, more than one person usually cannot transmit
radio signals at the same frequencies, at the same time, in the same direction. The
spectrum, unlike other natural resources, is not destroyed by use. As soon as one user
stops transmitting signals over a portion of the spectrum, another can immediately
re-use it. The spectrum is scarce, however, because at any given time and place, one
use of a frequency precludes its use for any other purpose.
Uses of the Radio Spectrum
Spectrum is used to provide a variety of wireless communications services
which are categorized as fixed or mobile voice/data services or broadcast services.
Demand for all wireless services has grown rapidly in recent years. Federal agencies
use spectrum for various purposes, including military and national security needs,
Voice of America broadcasts, weather radio services, radars and communication
systems to control commercial and private air and maritime traffic, weather satellite
2For further discussion see CRS Report 96-401 SPR, Telecommunications Signal
Transmission: Analog vs. Digital, May 7, 1996.

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CRS-3
systems, flood warning and water control systems, and time signals. Commercial
spectrum uses are equally as varied.
Commercial Voice and Data Transmission Services
! Cellular telephone systems consist of an array of terrestrial base stations (each
covering an area called a cell) that transmit and receive signals to and from
mobile or fixed wireless telephones to provide two-way voice and data
communications over a geographic region.
! Paging is a low-cost one-way message-sending systems that use base stations
similar to cellular telephone systems. An enhanced paging, called messaging,
has a limited two-way capability.
! Personal communications service (PCS) is a wireless telephone service
similar to cellular telephony but using higher frequencies (around 2 GHz) and
digital signal transmission technology (cellular services are starting to convert
to digital). Narrowband PCS can provide two-way messaging for interactive
low-speed data applications (such as e-mail) but generally not voice, while
broadband PCS provides a wider range of services.
! Interactive video and data services (IVDS) is a new subscription service that
allows viewers to interact with cable and broadcast television.
! Specialized mobile radio (SMR) is a wireless service for public safety and
dispatch communications. Newer enhanced SMR systems connect to the
public telephone network to compete against cellular and PCS.
! Satellite systems provide communications to very large regions using signal
transmissions between satellites and ground facilities. Geostationary satellites
maintain a fixed position relative to a point on Earth. Communications
satellites are used for voice, data, and broadcast purposes for government and
commercial operations. Low and medium Earth orbiting satellite systems are
also being developed for commercial communications services including
paging, voice, fax, and interactive services.
Additionally, the Federal Communications Commission (FCC) has made
spectrum available for unlicensed data services used for low-power applications, such
as cordless telephones, and other innovations. For example, unlicensed spectrum is
used for wireless computing, whereby portable laptop computers interact with
mainframes or wireless local area networks (LANs). Providing this free spectrum for
unlicensed data services is known to stimulate entrepreneurial activity, and use of this
spectrum is intensive. The FCC recently made another 300 MHZ in the five GHz
range available for Unlicensed National Information Infrastructure (NII) devices to
facilitate wireless access to the NII and stimulate the development of new devices.
The FCC has also made extremely high frequency spectrum (above 40 GHz)
available for future unlicensed applications and has proposed making additional
spectrum available above 40 GHz.

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CRS-4
Commercial Broadcast Services
! Radio, the oldest broadcast service, uses 10 kHz for each terrestrial broadcast
license assigned by the FCC in AM and FM bands separated by geographic
regions. The radio industry is developing new digital audio broadcasting
(DAB) technology, and the FCC is developing rules for DAB services.
! Broadcast television includes over 1600 currently licensed full service TV
stations occupying 402 MHz in the VHF and UHF bands. Each TV station
has a 6 MHz license. Television broadcasters are now starting to provide new
digital television services using the vacant portions of the same spectrum
bands.
! Multipoint distribution service (MDS), also called wireless cable, is a
television broadcast system using digital encrypted signal transmissions in the
microwave band (2 to 3 GHz). With small (4 inch square) receivers, MDS
subscribers can receive 100 TV channels. In the FCC regulations, MDS
includes both single channel and multi-channel MDS (MMDS) applications
(a more commonly used term).
! Direct broadcast satellite (DBS) is a new high powered satellite television
delivery system operating using small receiving antennas in the 12.2-12.7
GHz band. It is related to direct-to-home (DTH) satellite television services
that use large receiving antennas that have been offered for over a decade and
operate in several other frequency bands.
! Digital Audio Radio Services (DARS) is a new high-fidelity radio service
planned by several companies to be delivered by geostationary satellite. A
single DARS transmission will cover the entire nation.
! Local multipoint distribution service (LMDS), also called cellular television,
is a new video distribution service for urban areas. Using a cellular
architecture, LMDS can also provide two-way telephony (to compete with
cellular telephone services), teleconferencing, telemedicine, and data services.
Management of the Radio Spectrum
The federal government has been involved with managing the spectrum since
the first radio broadcast signals were transmitted in the beginning of the 20th century.
The Radio Act of 1912 required the registration of transmitters with the Department
of Commerce but did not provide for the control of frequencies, operating times, or
output powers. The Communications Act of 1934 established the FCC, as an agency
independent from the executive branch, to manage all non-federal government
spectrum (which includes commercial, state and local government uses), and
preserved the President’s authority to manage all federal government-owned and -
operated spectrum. The President also manages frequency assignments to foreign
embassies and regulates the characteristics and permissible uses of the government’s
radio equipment. The President delegates this authority to the Assistant Secretary of

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CRS-5
Commerce for Communications and Information who is also Administrator of the
National Telecommunications and Information Administration (NTIA).3
The 1934 Act directs the FCC to develop classifications for radio services, to
allocate frequency bands to various services, and to authorize frequency use. The Act
does not, however, mandate specific allocations of bands for federal or non-federal
use, which is generally decided through agreements between NTIA and the FCC.
The Act authorizes the FCC to grant licenses for radio frequency bands, but provides
few details other than requiring that FCC rulings be consistent with the “public
interest, convenience, and necessity.” The Act authorizes the FCC to regulate “so
as to make available ... a rapid, efficient, nationwide, and worldwide wire and radio
communication service with adequate facilities at reasonable charges, for the purpose
of the national defense, and for the purpose of promoting safety of life and property.”
The Telecommunications Act of 1996 (P.L. 104-104) did not change this portion of
the statute.
The primary FCC offices that implement spectrum policy are the Mass Media
Bureau (which regulates all U.S. television and radio stations), the Wireless
Telecommunications Bureau (which manages all domestic commercial wireless
services except those involving satellite communications), the International Bureau
(handling international telecommunications and satellite policies), and the Office of
Engineering and Technology (developing spectrum allocations and policy,
experimental licensing, spectrum management and analysis, technical standards, and
equipment authorization). The FCC develops rules for spectrum use and other
telecommunications regulation through lengthy proceedings in accordance with the
Administrative Procedures Act.
The NTIA offices that work on spectrum policy include the Office of
International Affairs which represents U.S. interests in international fora, and the
Office of Spectrum Management which develops policies and procedures for
domestic spectrum use by the federal government. This entails developing long
range plans and war and readiness plans for spectrum use, chairing the
Interdepartment Radio Advisory Committee (IRAC) composed of representatives of
20 major federal agencies who develop policies for federal spectrum use, and
representing the United States at International Telecommunications Union
conferences such as the World Radio Conference.
NTIA assigns frequencies and approves the spectrum needs for all federal
government systems to support their mandated missions.4 NTIA strives to improve
federal spectrum users’ efficiency by requiring federal users to use commercial
services where possible, promoting the use of new spectrum efficient technologies,
developing spectrum management plans, and collecting spectrum management fees
All
3
U.S. spectrum allocations must comply with agreements made biannually at World
Radio Conferences of the International Telecommunications Union (part of the United
Nations) which assigns frequencies for the various uses.
4Major federal spectrum users include the Departments of Defense, Justice,
Transportation, Energy, Interior, Commerce, the National Aeronautics and Space
Administration, and the Federal Emergency Management Agency.

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CRS-6
(pursuant to congressional mandate). Since most spectrum is shared between
government and private sector uses, NTIA is working toward increasing private
sector access to the shared spectrum. As a provision of the Omnibus Reconciliation
Act of 1993 (P.L. 103-66), NTIA has reallocated 235 MHz of spectrum from federal
government use to the private sector (90 MHz of that amount is scheduled to be
reallocated by the year 2004).
5
Using Auctions to Manage the Spectrum
Since two or more transmissions over the same frequency in the same location
could interfere with each other, a system of exclusive licenses for users of specific
frequencies was developed. In the past, the FCC granted licenses using comparative
hearings and lotteries. After years of debate over the idea of using competitive
bidding (or auctions) to distribute licenses, the Omnibus Reconciliation Act of 1993
directed the FCC to conduct auctions for licenses for certain wireless
communications services. These fall mainly under a broadly defined set of services
called commercial mobile radio services (CMRS) which include PCS, cellular, and
most SMR and satellite services. CMRS services are regulated as common carriers
(with some exceptions) to ensure regulatory parity among similar services that will
compete against one another for subscribers.6
P.L. 103-66 permits the FCC to conduct auctions only when applications are
mutually exclusive (i.e., two licensees in the same frequency band would be unable
to operate without causing interference with each other) and services are primarily
subscription-based.
7 The FCC does not have authority to conduct auctions for
licenses that have already been issued. Several legislative provisions were enacted
in the 104th Congress directing the FCC to conduct auctions for additional spectrum
bands. One important measure of the effectiveness of a licensing scheme is th
8
e
speed with which licenses are granted. Auctions have proven to be far speedier than
either comparative hearings or lotteries, cutting the time required to obtain a license
from up to four years to under six months.
For the first several years of auctions, the FCC developed auction rules for each
auction held, although there were some common elements. As a screening
mechanism, all auctions require bidders to submit applications and up-front payments
prior to the auction. Most auctions are conducted in simultaneous multiple-round
5 From the testimony of Larry Irving, Assistant Secretary for Communications and
Information and Director of NTIA, before the House Subcommittee on Telecommunications,
Trade, and Consumer Protection, April 24, 1997.
6 Other services, classified as Private Mobile Radio Services (PMRS), are prohibited
from connecting to the public switched telephone network.
7 Licenses are issued for the use of bands of spectrum, and the greater the bandwidth,
the more information can be sent.
8 For further discussion and analysis see CRS Report 95-923, FCC Auctions:
Legislation in the 104th Congress, last updated October 11, 1996. Also see CRS Report 97-
171, Electromagnetic Spectrum Auctions: Economic and Budgetary Considerations.
February 4, 1997.

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CRS-7
bidding, in which bids are accepted on all licenses around the country simultaneously
using electronic communications in consecutive rounds until all licenses are sold.
Even though licenses must be renewed periodically, it is generally understood that
license winners will be able to keep the license perpetually, as long as they comply
with FCC rules.
9
In some auctions, the FCC gave special bidding credits to smaller companies,
called entrepreneurs, defined as having annual gross revenues of less than $125
million and total assets of less than $500 million. The FCC had originally proposed
also to give special provisions to women-owned, minority-owned, and rural
telephone companies (so-called designated entities). The FCC removed the other
groups, however, after the 1995 Supreme court decision in the “Adarand” case,
which determined that government affirmative action policies must pass a “strict
scrutiny” test to demonstrate past discrimination.
10
The FCC also develops service rules for each new service for which a license
will be used. Licenses are granted according to the amount of spectrum and the
geographic area of coverage. Licenses can cover small areas, large regions, or the
entire nation. Terms used for coverage areas include basic trading areas (BTAs)
which correspond roughly to metropolitan areas, major trading areas (MTAs), which
are combinations of BTAs dividing the United States into 51 geographic regions of
similar levels of commercial activity, and regions, which are combinations of MTAs.
Metropolitan statistical areas (MSAs), rural service areas (RSAs), and economic
areas (EAs), developed by the Department of Commerce for economic forecasts, are
also used by the FCC to define areas of coverage for some spectrum auctions.
The FCC is also modifying some wireless service rules to help new spectrum
licensees maximize the value from their licenses. Changes include allowing
licensees to partition licenses for greater efficiency, sharing regions among licensees,
and expediting the relocation of incumbent microwave licensees from the spectrum
purchased in the PCS auctions.
By the Spring of 1997, the FCC had raised over $22 billion in auctions, and
many observers in government and the private sector claimed auctions to be a
success. That enthusiasm decreased somewhat, however, after the results of two
auctions, held in April 1997, for wireless communications services (WCS) and digital
audio radio service (DARS). The WCS auction was mandated by the FY1997
Omnibus Appropriations Act (P.L. 104-208), which directed the FCC to reallocate
the use of 30 MHZ of spectrum (specifically, 2305-2320 and 2345-2360 MHZ) and
to assign those frequencies by an auction to begin by April 15, 1997. The FCC was
able to meet that schedule, and the WCS auction was concluded by April 25, 1997,
selling 126 licenses in 5 and 10 MHZ blocks, with various regional coverage. The
revenue obtained, however, was only $13.6 million, far lower than the $1.8 billion
that the Congressional Budget Office (CBO) had estimated could be raised from that
9 The FCC provides additional information on auctions on its web site at http://www.
fcc.gov/wtb.auctions.htm
Nevertheles
10
s, concerns were raised that some of the “small businesses” actually were
representing larger companies excluded from the auctions.

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CRS-8
auction. Critics offered several reasons for the shortfall, one being the shortened
timetable set by Congress for the FCC to complete the WCS auction.
Another possible reason that the WCS revenue was lower than expected is
related to the technical constraints around the WCS spectrum. To make room for
WCS spectrum, Congress directed the FCC to reallocate some of the spectrum that
was previously allocated to DARS. As a result, DARS was left with only a 25 MHZ
band (down from 50 MHZ) which is surrounded by the spectrum allocated for WCS.
In designing the service rules for WCS, the FCC restricted the out-of-band power
WCS may radiate into the DARS band so that WCS and DARS would not interfere
with each other. This restriction, however, reduces the usefulness of WCS spectrum.
After much delay in the DARS proceeding, the FCC conducted the DARS auction
in April 1997, just before the WCS auction so that losing DARS bidders could bid
on WCS licenses. Two DARS licenses were auctioned, each 12.5 MHZ around the
2.3 GHz range and having nationwide coverage, raising $173 million.
To date, the FCC has raised almost $23 billion for the U.S. Treasury from
spectrum auctions, although only $12 billion in revenues have been collected.11 The
bulk of the revenue came from auctions of broadband PCS licenses, and lesser
amounts were raised from auctions of other licenses including IVDS, SMR in the 900
MHZ range, MDS, and DBS. While all of the broadband PCS auctions are complete,
there are still many narrowband PCS licenses (for BTA and MTA markets) that will
be auctioned. Table 1 lists types of licenses auctioned to date and a revised estimate
of the revenue.
Many still consider the auctions to be a success, for the federal revenue
generated, as well as for the speed with which licenses auctioned have gone to the
companies that value them the most and will put them to use. Moreover, many prefer
letting businesses determine whether to invest in a new service rather than relying on
the government to decide who receives a spectrum license. The FCC has concluded
that auctioning of spectrum licenses has contributed to the rapid deployment of new
wireless technologies, increased competition in the marketplace, and encouraged
participation by small businesses. In recent years, several other countries aroun
12
d
the world have also begun to use auctions to distribute licenses to use spectrum
bands.
LMDS Auction. The auction for Local Multipoint Distribution Service
(LMDS), a new television distribution service for urban areas, began on February 18
and was completed on March 25, 1998. Two LMDS licenses were auctioned in each
of 493 BTA regions for a total of 986 licenses. LMDS uses much higher frequencies
than existing commercial wireless services. One of the LMDS licenses is 1,150 MHZ
in the 28 GHz band and the other is 150 MHZ in the 31 GHz band. LMDS is a fixed
microwave service, similar to MMDS, but also offers two-way audio or video
communications. LMDS could compete with cable TV, broadcast TV, MMDS, or
11According to auction rules, winning bidders make payments in installments over the
terms of the licenses. In addition, some auction winners have defaulted on their payments.
12FCC Report to Congress on Spectrum Auctions, WT Docket No. 97-150 (FCC 97-
353), released October 9, 1997.

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CRS-9
direct broadcast satellite TV, as well as wireless telephone services, high speed data
transmission, and video teleconferencing.
Table 1: Licenses Auctioned to Date
license type and
amount of spectrum
number of
revenue:
geographic area
and its uses
licenses
$millions
narrowband:
0.8 MHZ: paging,
10
650
nationwide
messaging
IVDS:
1 MHZ: information
594
214
MSAs
services
narrowband PCS:
0.2 MHZ: paging,
30
395
regional
messaging
broadband PCS A&B
60 MHZ: full service
102
7,736
blocks: MTAs
digital telephony
DBS:
shared spectrum*
2
735
nationwide
subscription television
service
MDS:
heavily encumbered
493
216
BTAs
spectrum*
subscription TV broadcast
900 MHZ SMR:
50 MHZ: mobile
1,020
204
MTAs
dispatching
broadband C-Block
30 MHZ: full service
493
9,967
PCS: BTAs
digital telephony
broadband PCS blocks
30 MHZ (three 10 MHZ
1,472
2,523
D, E, and F: BTAs
licenses): digital telephony
unserved cellular areas
50 MHZ (encumbered):
14
2
mobile telephone service
wireless communication
30 MHZ: multiple
126
14
service: Major/Regional
wireless uses
Economic Areas
digital audio radio
25 MHZ: satellite radio
2
173
services: nationwide
broadcast
800 MHZ SMR:
1 MHZ, 3 MHZ, and 6
525
96
Economic Areas
MHZ: mobile dispatching
LMDS: BTAs
1,150 MHZ and 150 MHZ
986
577
Total
$23,503
Source: FCC. Prepared by CRS.
*Due to the DBS rules for spectrum channelization and the existence of many licensees encumbering the MDS
spectrum, the amount of spectrum for the DBS and MDS auctions cannot be easily established.

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CRS-10
The LMDS auction raised $577 million in proceeds. Although no official estimates
were made of expected revenue prior to the auction, based on the amount of spectrum
auctioned, some in the private sector had expected far higher revenues.
Finding spectrum for LMDS was complicated due to the spectrum needs of new
satellite services in the same bands. At the time when the FCC was developing plans
for LMDS spectrum, several companies developing new fixed satellite services (FSS)
requested the same spectrum for sending signals to their satellites. FSS systems use
geostationary and non-geostationary satellites to provide world-wide voice, video,
and interactive data services to users at fixed locations. Mobile satellite services
(MSS), which serve mobile users as well as fixed users, also wanted these
frequencies to interconnect MSS systems to other communications networks, and the
FCC had already granted licenses to several of these companies. Also, this frequency
range is currently used by several point-to-point microwave terrestrial systems (those
in which signals originate from ground stations). These frequencies are being used
increasingly by terrestrial systems around the world, making the equipment used for
these systems more valuable for export. The equipment manufacturers wanted to
preserve this spectrum for their terrestrial systems.
The satellite services industry convinced the FCC not to auction the spectrum
allocated for their services. They argued that since satellites can potentially cover
any geographic area on the earth, satellite frequencies are shared among all nations
that use its services. Thus a satellite service provider might have to obtain a
spectrum license from every nation it plans to service. If every nation holds auctions
for that spectrum, satellite companies might not be able to bid effectively for U.S.
licenses.
13
Against protests from both sides, however, the FCC divided the 28 GHz band
among LMDS, geostationary FSS, non-geostationary FSS, and MSS. The FCC also
adopted auction rules for LMDS licenses. A frequency band around 18 GHz was
14
designated for FSS downlink signals to share with several other services. Th
15
e
wireless services industry has shown strong interest in LMDS auction, which has
raised over $500 million to date.
Planned Future Auctions
The FCC plans to use auctions in the future to distribute licenses for the
following other wireless services:
1 3 Public Harms Unique to Satellite Spectrum Auctions. March 18, 1996. Strategic
Policy Research. Bethesda MD.
1 4 FCC CC Docket 92-297 Fourth NPRM and First Report and Order on Domestic
Public Fixed Radio Services, released July 22, 1996, amended by an Order on
Reconsideration, released May 16, 1997, and Second Order on Reconsideration, released
September 12 1997 to Establish Rules and Policies for LMDS and FSS.
1 5Licenses for a new service, called digital electronic messaging service (DEMS),
which may also be distributed using auctions, was proposed for the 18 GHZ range, but the
FCC decided to move DEMS to the 24 GHz range, also to be shared with other satellite
services. DEMS could compete with LMDS.

---

CRS-11
Additional IVDS licenses. The FCC had planned to offer two IVDS licenses
in each of the 428 rural service areas (RSAs), plus 127 MSA licenses on which the
previous winning IVDS bidders defaulted. Just prior to the scheduled start date
(February 18, 1997), the auction was postponed indefinitely as a result of numerous
petitions from industry and Congress to revise the service rules to make these
licenses more attractive to bidders.
220 MHz Band. The FCC has allocated 908 narrowband licenses in the 220
MHZ band: three nationwide licenses (each 100 kHz paired), 30 regional licenses
(150 kHz paired), and 875 Economic Area licenses (100 kHz paired) to provide
voice, data, and paging services. The auction is scheduled to begin on May 19, 1998.
General Wireless Communications Services (GWCS). The FCC has allocated
five licenses, 5 MHZ each, between 4660-4685 MHZ, to be auctioned in each of 175
Economic Areas, for a total of 875 licenses. There are, however, incumbent licensees
in that spectrum in many parts of the country. GWCS licenses, conceived to be
similar to WCS, may be used to provide any fixed or mobile communications
services except broadcast, radiolocation, and satellite services. These may include
voice, video, and data services, private microwave, broadcast auxiliary, and ground-
to-air signals. GWCS auctions will begin on May 27, 1998.
The FCC is also
Table 2: Future FCC Auctions
planning auctions for
additional commercial
License Type:
Frequency Range
spectrum licenses. These
Geographic Area
include the re-auction of the
IVDS:
500 kHz licenses at
PCS C-block licenses for
MSA and RSA
218 and 219 MHZ
which previous winners
220 MHZ services
220-222 MHZ
defaulted, the rest of the
narrowband PCS licenses
GWCS
4600-4685 MHZ
(auction scheduled to begin
narrowband PCS:
50 KHz paired licenses in
September 29, 1998), new
MTA and BTA
the 900 MHZ range
paging systems (planned as a
paging
licenses of varying sizes
series of auctions of small
between 35-930 MHZ
frequency bands between 35
Location Monitoring
25 KHz licenses in the 900
MHZ and 930 MHZ for
Services
MHZ range
common carrier and private
carrier paging), and th
16
e
39 GHz services
50 MHZ paired licenses
remaining SMR licenses in
from 38.6-40.0 GHz
the 800 MHZ range. Other
spectrum licenses the FCC is
considering for possible auction include location monitoring services, licenses in the
39 GHz range, public coast stations, and analog broadcast licenses for commercial
radio and television stations, all of which would begin later in 1998. Licenses the
FCC is planning or considering for future auctions are listed in table 2.
16FCC WT Docket 96-18 Second Report and Order and Further NPRM, to Facilitate
Future Development of Paging Systems, released February 24, 1997. Auction to begin in
3rd quarter 1998.

---

CRS-12
Spectrum Value
Spectrum value depends on many factors, such as the amount of spectrum, its
frequency locations (since transmission characteristics vary along different parts of
the spectrum), the geographic area covered, the services permitted by FCC rules, the
availability of equipment that can operate at those frequencies, the demand for
services that do not interfere with other bands the amount of spectrum already
available for similar services, the number of incumbents presently occupying the
spectrum, and whether incumbents will remain in that spectrum or be relocated to
other spectrum. Spectrum value may be greater if adjacent bands can be aggregated
to form larger blocks and if the given spectrum is not encumbered by other licensees
using the same frequencies. Thus it is impossible to determine in advance precisely
the revenue that can be obtained from a given spectrum auction.
After an auction closes, spectrum value is often measured by the total dollars
raised per “MHZ-pop” (the number of MHZ provided in a license multiplied by the
total population covered by the license, similar to a unit price). However, the MHZ-
pop value of a given license can vary significantly from one auction to another. In
the PCS auctions, for example, the narrowband PCS licenses drew over six times
more revenue per MHZ-pop than the broadband PCS licenses, but drew much less
revenue because of the smaller amount of spectrum auctioned.
Technology Considerations
Several technological advances could affect the outcome and prospects for
spectrum auctions. Today, the usable spectrum is considered to be below 300 GHZ.
The limitations with using higher frequencies include greater absorption of higher
frequency signals by the atmosphere, and difficulties of high frequency reception.
As the technology for radio transmission and reception improves, increasingly higher
frequency ranges will likely become available, opening up more spectrum for use.
These technology improvements may spur increased consumer demand for spectrum.
Some of the technical problems with high frequency signal transmission are
being solved by engineering techniques which could offset some of the spectrum
demand. These include methods of digital signal compression, which increases the
carrying capacity of currently used bands, error detection and correction which
maintain the signal integrity even in high levels of noise, and other advanced digital
techniques such as frequency hopping, in which the transmitted signal avoids
frequencies that are already being used. The use of fiber optic cables (which carry
signals over wires rather than propagating through the air, and therefore do not
require frequency allocations) also alleviates some of the demand for spectrum.
Spectrum Flexibility, Overlay Licenses, and Other New Provisions
In planning for future spectrum license auctions, the FCC is considering a policy
to allow users the maximum flexibility. “Spectrum flexibility” is a concept of
utilizing competitive market forces whenever possible to determine what use will be
made of any given band of spectrum. This may entail using auctions for most new

---

CRS-13
terrestrial spectrum licenses. It also entails defining new services broadly enough to
allow services to change as the technology evolves.
Some auctions will be for licenses where incumbent licensees are already using
the same frequencies within the geographic coverage of the new license. These new
licenses are called overlay licenses because they use frequencies that surround the
frequency of an existing licensee. The auction winner must prevent the operations
of its overlay license from interfering with those of an incumbent licensee. The new
licensee could either “work around” the spectrum of the incumbent licensee (by using
frequency hopping) or else the new licensee can buy out the incumbent within pre-
established conditions set by the FCC.
Overlay licenses were auctioned in the PCS auctions since there were already
incumbent licensees (called microwave licensees) using that spectrum. To help clear
the PCS spectrum of microwave incumbents, the FCC provided higher frequency
spectrum for the incumbents and required PCS licensees to pay for the costs of
relocating incumbents to higher frequencies. Placing that sort of requirement on the
new licensee, however, lowers the value of the license. Most licenses that the FCC
is considering for auction in the future will be encumbered with existing licensees to
an even greater extent than the PCS spectrum. In some cases the cost of relocating
the incumbent may exceed the value of the license, making it impossible to conduct
an auction. A further difficulty is that for some proposed auctions, the FCC has not
provided new spectrum to relocate incumbents.
In 1997, the FCC added two other provisions to help designated entities
participate in many of its auctions. One was to allow license winners to partition a
license into smaller geographic areas than were defined by the FCC. This allows a
smaller wireless service provider to set up a business in a smaller community without
having to serve an entire region. The other change was to allow licensees to
“disaggregate” a portion of the spectrum assigned to their license, that is, to divide
the spectrum into several smaller spectrum blocks. This enables smaller companies
to use a portion of the spectrum for some specialized service.
In December 1997, the FCC adopted a single set of rules for all subsequent
auctions.
17 The new rules were designed to simplify the auction process, such as the
applications and payment procedures for bidders. In an attempt to create incentives
for small businesses, women-owned, minority-owned, and rural telephone companies
the FCC adopted uniform affiliation rules and ownership disclosure rules. The new
rules also provide for higher bidding credits for small businesses (15, 25, and 35
percent, based on the size of the business). However, the new rules no longer allow
installment payments for designated entities in future auctions.
The Balanced Budget Act of 1997
On August 5, 1997, the Balanced Budget Act of 1997 was enacted as P.L. 105-
33. Title III, sections 3001-3008, of the Act contained budget-related
communications and spectrum allocation provisions, and are summarized below.
Third
17
Report and Order/ Second Further Notice of Proposed Rulemaking (FCC-413).

---

CRS-14
3002(a) provides for the expansion of the FCC’s auction authority to
nclude any spectrum licenses for which there are mutually exclusive applicants, with
xceptions for public safety radio services, and certain private internal radio services
as utilities, railroads, transit systems, pipelines, private ambulances, an
volunteer fire departments.
September
y
exclusiv applications for new radio or television broadcast licenses received after
30, 1997. For applications filed prior to that date, bidding will be limited to
e who have already filed. The FCC was also directed to experiment wit
combinatorial
f
licenses simultaneously, and to establish minimum opening bids and reasonable
Sections
0
M
ecifically, the transfer and planned auction
o
already reallocated by NTIA from government use will
b
the FCC is required to auction an additional 55 MHZ located
below
is required to reallocate another 20 MHZ below three
GHz or commercial uses. Additionally, private parties are permitted to reimburse
entities for the costs of relocation if the private parties want to expedite the
Section
o
be
ptured in 2006. The Act requires the FCC to conduct auctions for the 78
of analog television spectrum to be reclaimed from television broadcasters
That spectrum is to be auctioned in
2006. It the
s
where
e of the following three conditions exist: (1) if one or more of the
stations affiliated with the four national networks are not broadcasting a
igital television signal, (2) if digital-to-analog converter technology is not generally
able in the market of the licensee, or (3) if at least 15% of the televisio
households
-
c
ing distributor” (e.g.., cable or satellite services) and do not
h
al television set or converter. To maximize the pool of potential bidders
i
returned analog TV spectrum, the FCC may not disqualify bidders
due
duopoly or cross-ownership rules if the population of the city in question is
Section
s
t
TV channels 60-69 for public safety services
a
MHZ in that band for commercial use. The public safety
li
must be assigned in 1998 and the auction must start by January 1, 2001.
the transition to DTV, the FCC must ensure that new spectrum users an
existing television licensees could
bill di
e
reassigned other spectrum where possible.
3005 directs the FCC to allocate spectrum for “flexible use,” whic
means d
e
telecommunications technology evolves. These allocations must be consistent with

---

CRS-15
internat
agreements, must be required by public safety allocations and in the
Section 3006 made a change to the universal service fund payment schedule that
as later repealed in the FY1998 Appropriations Act (P.L. 105-119). The universal
vice fund is a congressionally mandated account managed by the Nationa
Exchange Carriers Association, and financially supported
from
s
compa
were to pay into the universal service fund $3 billion less than they
therwise would have paid, and a federal appropriation to the FCC would cover the
3 billion shortfall. Then in FY2002, the telecommunications companies would pay
he fund $3 billion more than would otherwise be paid, and those proceeds would be
red to the federal treasury to balance the budget. Several Members an
private
e
revenue
e
f
the improving revenue forecasts by the Fall of 1997,
t
longer needed to balance the federal budget. Table 3 provides
a
of auctions mandated by the Balanced Budget Act and Table 4 lists the
CBO
tes of the additional auction revenue that can be obtained from the
Table 3: Auctions to Be Scheduled per Balanced Budget Act of 1997
Frequency Band Name
Amount
Planned FCC Actions
(MHZ)
Government Fixed and Mobile
45
begin auction after 1/1/01
2110-2150
40
Broadcast Auxiliary; (MSS)
1990-2110
complete assignment by 9/30/02
Government Spectrum
20
complete assignment by 9/30/02
Recaptured Broadcast Channels
668-746
complete assignment and report
(from 46-59)
portion of Broadcast Channels 60-69
746-806
allocate by 1/1/98; begin auction
after 1/1/01
234
source: FCC Report to Congress on Spectrum Auctions, released October 9, 1997 (page 38).
Table 4: CBO Revenue Estimates for Spectrum Auctions
Mandated by the Balanced Budget Act ($millions)
Provision
Revenue
analog TV broadcast
4,000
portion of channels 60-69
2,100
broaden and extend FCC authority
5,800
directed allocations (120 MHZ)
9,500
Total
$21,400
Source: CBO transmittals

---

CRS-16
Spectrum Issues for Congressional Consideration
Allocation of Spectrum for Federal vs. Commercial Use
One issue that has already received some congressional attention is whether to
transfer additional federal spectrum to the private sector. Most federal agencies
require spectrum to support their missions. As a result of the Omnibus Budget
Reconciliation Act of 1993 (P.L. 103-66), federal agencies are vacating a 235 MHZ
band of spectrum below 3 GHz, and giving it to the FCC to make available for
commercial uses. In recent years, industry has increased pressure on Congress to
release additional federal spectrum for commercial use. Consequently, federal
agencies have become increasingly concerned over the potential loss of spectrum.
NTIA, manager of all spectrum used by the federal government, claims that releasing
any additional spectrum could result in costs greater than the potential revenue from
an auction, and could compromise national security, public safety, law enforcement,
and air traffic control operations.
18
The Department of Defense (DOD), the largest federal user of spectrum, argues
that it needs all of the spectrum it is currently allocated to maintain high quality
communications to support national security. Some in DOD were concerned about
a provision in the FY1997 Omnibus Appropriations Act (P.L. 104-208) directing the
FCC to auction 30 MHZ of spectrum previously allocated for shared commercial and
government radio services. Some claim that those frequencies were highly desirable
for military use. Despite these ques
19
tions, the Administration has continued with the
spectrum reassignment process. In January 1997, NTIA released another 25 MHZ
of the spectrum (4635-4660 MHZ) from federal use to the FCC to use for
commercial applications. The Navy had planned to use that spectrum, combined
with another 25 MHZ of spectrum released in 1995, for a radar and communications
systems in development.
A General Accounting Office (GAO) report investigated the potential impact
of the transfer of that 50 MHZ from DOD to commercial uses. The repor
20
t
recommended that DOD consolidate its spectrum management functions and expand
an ongoing study of its spectrum uses, and that the “FCC suspend plans for
auctioning the reallocated 50 MHZ and other transfers of spectrum until Congress
and the President have reviewed the DOD report” of its frequency requirements. The
FCC is mandated by P.L.104-208 to issue licenses for part of that 50 MHZ and does
not plan to suspend its auction. DOD was not able to reclaim the spectrum since it
had already been transferred to the FCC by a Presidential Directive.
18Testimony of Hon. Larry Irving to House Commerce Committee,
Telecommunications and Finance Subcommittee, March 21, 1996, and Senate Commerce
Committee, June 20 and 25, 1996.
19Congress Spectrum Raid Riles DOD. Military Space, November 25, 1996 p. 1.
20GAO Report to Congressional Committees. Defense Communications: Federal
Spectrum Sale Could Impair Military Operations, June 1997. GAO/NSIAD-97-131.

---

CRS-17
Despite DOD’s concerns over reallocating spectrum, the Balanced Budget Act
of 1997 (P.L.105-33) directed NTIA to reassign an additional 20 MHZ below 3 GHz
to the FCC for auction. In February 1998, NTIA identified five spectrum bands and
a schedule for reallocation from federal agency use with the next ten years. The
report concluded, however, that such a spectrum release could adversely affect
critical agency missions and the ability to provide services to the public. The report
21
also estimated the costs to federal agencies to modify existing equipment and
facilities to use alternative frequencies. The total costs estimate is $1.056 billion at
a minimum, including $1.01 billion estimated by the Army, Navy, and Air Force,
assuming that suitable spectrum will be available such that extensive system
modifications will not be required to avoid interfering with new commercial users.
The report concluded that the loss of the identified spectrum could restrict spectrum
use during defense training exercises, ultimately affecting operational readiness and
national security.
There are several reasons that one could question whether it would be prudent
to proceed with plans to reallocate the spectrum identified by NTIA. From a
budgetary standpoint, the amount of revenue that can be obtained from the auction
of the 20 MHZ is uncertain. It is possible that the revenue would be less than the $1
billion estimated cost to reallocate federal users. Policymakers might also consider
the potential loss of defense readiness, the potential disruption of federal services,
and other possible unforeseen costs related to the reallocation.
One of the main criteria that NTIA used in selecting the spectrum for
reallocation was the potential desirability of a particular frequency band among
commercial users. Perhaps other spectrum bands would be less costly for federal
agencies to vacate and would not have as great an impact on federal operations. As
an alternative to the current spectrum allocation plan, NTIA might be able to re-
negotiate with federal agencies to identify other spectrum bands for reallocation,
placing the commercial viability of the spectrum on a lower priority.
Spectrum Needs of Intelligent Transportation Systems
For several years, the automotive industry and the federal government have been
working together to develop the electronics, communication systems, and
information processing to improve the efficiency and safety of surface transportation
systems. These planned systems are collectively referred to as intelligent
transportation systems (ITS).22 In 1997, the Intelligent Transportation Society of
America, an organization established by Congress to coordinate the development and
deployment of ITS, filed a petition for rulemaking with the FCC, to reallocate 75
MHZ between 5.850 and 5.925 GHz on a co-primary basis with current users of this
spectrum (meaning that ITS users would receive the same level of protection from
interference as other primary users, and a higher level of protection than secondary
NTIA
21
Spectrum Reallocation Report (Publication 98-36): Response to Title III of the
Balanced Budget Act of 1997.
2 2 For further information on ITS, see CRS Report 97-691 SPR, Intelligent
Transportation Systems Program: Importance, Status and Options for Reauthorization, June
27, 1997.

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CRS-18
users). That frequency band is currently assigned to be shared between federal
operations (used primarily by DOD) and commercial fixed satellite (Earth to Space)
services, each with co-primary status (Amateur radio has a secondary status in this
band).2 ITS would use this spectrum for dedicated short range communication
3
s
between roadside traffic systems and vehicles traveling at highway speeds. ITS
America proposed possible applications such as electronic toll collection (a system
that automatically reads a debit card located on the vehicle, removing the need to stop
at toll booths), and automatic safety checks to weigh trucks, check permits, track
hazardous materials, and authorize further inspections as necessary.
24
The FCC responded to the petition with a Public Notice and request for
comments from interested parties. The FCC is currently reviewing comments and
further action on the item is expected some time in 1998. If the FCC decides to
reallocate the spectrum identified by the ITS America Petition, the next step is to
decide how to distribute licenses. The FCC could propose to auction the ITS
spectrum to commercial users, or grant licenses to non-commercial ITS spectrum
users such as state and local governments, or some combination of the two options.
In addition to the FCC's action, both House and Senate versions of the federal
highway reauthorization legislation, currently in conference, include provisions to
allocate spectrum for ITS. The House bill, known as the Building Efficient Surface
Transportation and Equity Act of 1998 (H.R.2400), contains a provision directing the
Secretary of Transportation, "in consultation with the Secretaries of Commerce and
Defense and the FCC, ... to secure the necessary spectrum for the near-term
establishment of a dedicated short-range vehicle to wayside wireless standard." The
25
Senate bill, known as the Intermodal Transportation Efficiency Act of 1998 (S.1173),
contains a similar provision. If this legislation is enacted, the FCC would have
26
a
statutory mandate to continue with its proceeding on allocating ITS spectrum.
Digital Television Spectrum
A major debate took place in the 104th Congress over whether to direct the FCC
to conduct auctions for the spectrum allocated for advanced television, later called
digital television (DTV). CBO estimated that $12.5 billion could be raised from
DTV auctions. With the defeat of an amendment in the House to prohibit the FCC
from assigning DTV licenses, however, the FCC did not gain the authority to auction
the those licenses.27 In April 1997, the FCC adopted a plan to issue 6 MHZ DTV
U.S.
23
Table of Spectrum Allocations. Code of Federal Regulations, Title 47, Chapter
1, Section 2.106, October 1, 1996 Edition.
2 4Petition for Rulemaking before the FCC by ITS America. 1101 30th St. NW,
Washington, DC 20007. May 19, 1997.
25H.R.2400, Part III, Subtitle B, Sec. 653(b)(4), passed by the House April 1, 1998.
26S.1173, Title II, Subtitle B, Sec. 2103(f), passed by the Senate on April 2, 1998.
27For a discussion and analysis of the debate over whether to conduct auctions for the
DTV licenses, see archived CRS report 96-74, Advanced Television: Radiofrequency
Spectrum Issues, updated January 23, 1997.

---

CRS-19
licenses, free of charge, to all full power incumbent television broadcasters. Once
28
the DTV licenses were granted to some 1600 broadcasting stations across the
country, it was no longer possible to auction the DTV spectrum.
The FCC ruling requires broadcasters to use the DTV spectrum to provide free
digital programming that is at least comparable in resolution to today’s analog
television service and aired during the same times. Broadcasters may also use the
DTV spectrum to provide subscription services such as electronic publications,
Internet access, video programming, interactive media, and audio services. The FCC
gave broadcasters this flexibility to stimulate consumer acceptance of the new
technology and the purchase of digital television receivers.
The ruling requires affiliates of the four networks (NBC, CBS, ABC, and Fox)
in the top 10 markets to provide a digital signal by May 1, 1999, and affiliates in
markets 11-30 to provide a digital signal by November 1, 1999. Broadcasters in the
top ten markets promised to begin operations by November 1, 1998. All DTV
licensees must provide a digital signal by 2003. The rules enable the FCC to grant
an extension to licensees that are unable to meet the requirement due to
unforeseeable or uncontrollable circumstances, such as an inability to secure tower
locations for new antennas. Broadcasters will cease broadcasting the analog signal
and return their analog television licenses in 2006, and that spectrum will be
auctioned for other commercial purposes. The Balanced Budget Act of 1997
(P.L.105-33) contained a provision enabling broadcasters to delay the return of the
analog licenses under certain circumstances.
In February 1998, after over 200 petitions for reconsideration from broadcasters
and others, the FCC modified its allotment table for DTV licensees, and made other
changes to DTV rules. One FCC Commissioner (Furchtg
29
ott-Roth) dissented to part
of that ruling that increased the amount of “core spectrum” to be retained for DTV
broadcasters, stating that the “costs of this decision could be enormous in terms of
the new services that consumers never see, or savings on existing service they never
realize.”
Several issues related to the transition to DTV remain unresolved. The FCC and
Congress plan to establish specific public interest obligations for DTV licensees.
Another question is whether cable television providers will be required to provide
any part of the DTV programming content, as they are for analog television
broadcasting. Many also want to ensure that the analog television spectrum will be
returned to the FCC for auction as planned. Some Members want to save low power
television stations from losing their licenses in the transition to DTV. Finally,
28FCC Fifth Report and Order on Advanced Television Systems and Their Impact on
Existing Television Service, released April 21, 1997.
29Memorandum Opinion and Order on Reconsideration of the Sixth Report and Order
(FCC-98-24), released February 25, 1998.

---

CRS-20
Congress is confronted with the controversy between state and local authorities and
broadcasters over the placement and construction of transmission towers.
30
Interoperability Standards
Another issue concerns the adoption of standards to insure Interoperability.
Many wireless systems in use or being developed are potentially incompatible with
each other, making it difficult for mobile users to roam outside their home system or
to switch service providers. In general, the FCC avoids mandating standards for new
wireless communications devices, preferring to let the market determine which
technologies prevail, except for insuring that signal interference does not occur.
The FCC also considers the special need for interoperability in establishing a
new service. In the FCC’s proceeding over selecting a standard for DTV, for
example, the television manufacturing industry argued that a single video
transmission standard was needed to expedite the transition to digital television and
the return of currently used television spectrum. The computer manufacturing
industry, however, criticized the standard proposed by the television manufacturers
for having interoperability problems with personal computers. Finally, the FCC
decided to let the market determine which standard, if any, manufacturers may use
for DTV video transmission.
Public Safety Spectrum Needs
Public safety services such as police, fire department, and emergency medical
services are concerned about having enough spectrum for future needs. With
congressional prompting, the FCC and NTIA set up the Public Safety Wireless
Advisory Committee (made up of appointees from the federal, state, local, and
private sector public safety organizations). In September 1996, the Committee
submitted a report outlining public safety needs for additional spectrum, improved
interoperability, more flexible licensing policies, and an increased sharing of spectral
resources. As a result, Congress included a provision in the Omnibus Appropriations
Act (P.L. 104-208) instructing the FCC to take into account these needs in its WCS
auction.
In January 1997, Senator McCain introduced the Law Enforcement and Public
Safety Telecommunications Empowerment Act (S. 255) to reallocate and auction
portions of television channels 60-69. However, most of the provisions of S.25
31
5
were included in the Balanced Budget Act (P.L.105-33), and the McCain bill has not
been pursued further. The FCC plans to reallocate 24 MHZ of the spectrum between
channels 60-69 for public safety services in 1998 and auction the remaining 36 MHZ
in 2001. This will require moving existing television stations to other frequencies
and revoking the licenses of some low power television and translator stations.
3 0 For further analysis of these issues, see CRS Report 97-925, Digital Television:
Recent Developments and Congressional Issues, updated December 23, 1997.
31Congressional Record, February 4, 1997, p. S945-949.

---

CRS-21
Congress might want to monitor the FCC's actions to minimize the impact on these
licensees.
Committee Jurisdiction
Tension continues to exist in both Houses between the Commerce Committee
and the Budget Committee over spectrum management jurisdiction. In September
1996, the Chairman and ranking Member of the Senate Committee on Commerce,
Science and Transportation sent a letter to the Senate leadership and the Budget
Committee chairman and ranking Member, expressing their concern that auctions
were being used as an instrument of budget policy potentially at the expense of
communications policy. One indication of this trend was seen in the Omnibus
Appropriation Act, which required the FCC to reallocate and auction 30 MHz of
additional spectrum by April 15, 1997, for budgetary purposes. That auction brought
in far less revenue than had been estimated by CBO prior to the auction. Many feel
that the time constraint prevented the FCC from working with industry to properly
establish the service and auction rules for the WCS spectrum, and potential bidders
did not have time to secure the financing necessary to participate in the auction.
Many policymakers agree that potential revenue should not be used as the main
argument for auctioning spectrum used by the government or public safety officials.
Some argue that potential revenue should not even be used as the main criteria for
auctioning commercial spectrum. In recent years, however, Congress has used
spectrum auctions to reduce the federal deficit, and legislation has been introduced
to use auctions to offset various spending programs (see examples in Box 1). Last
year the Budget Committees again asserted their authority over spectrum policy in
provisions for spectrum auctions in the Balanced Budget Act of 1997.
For FY1999, however, neither the President's budget proposal nor the Budget
Resolution includes provisions to obtain additional federal revenue from auctioning
spectrum beyond what has already been allocated for auction by previous legislation.
This could be a result of a decreased fiscal pressures as well as the acknowledgment
that recent auctions have produced less than expected revenues. Instead, other
potential sources of federal revenue, such as tobacco taxation, have been proposed.
Problems With Auction Procedures
C-Block Auction. Despite widespread praise for auctions, several significant
problems have occurred, causing anger and frustration among some groups of
bidders. One auction, known as the C-block auction, ultimately presented some
complex legal problems for the FCC. In the C-block auction, also called the
entrepreneur’s auction, the FCC gave bidding credits to small businesses to help
them compete with larger entities in the auction. The C-block auction was completed
in May 1996, when the FCC announced that it had raised $10.2 billion from winning
bidders. By mid-1997, however, several of the license winners, unable to obtain the
financing to build their PCS systems, had requested extensions to their installment
payments to the FCC. Some licensees had filed for bankruptcy. If the FCC had tried
to reclaim and re-auction the licenses, the winning bidders could have filed legal suits
against the FCC, presumably arguing that the FCC had undermined the value of the

---

CRS-22
C-block licenses by selling other licenses for significantly less in subsequent
auctions. Then the licenses could have possibly been held by the courts for an
indefinite period, defeating the FCC’s main goal of increasing competition in the
wireless telephone market. If the FCC had granted everything that the C-block
licensees requested, then the losing bidders and license winners from other auctions
might have sued.
Box 1: Legislation Using Auctions to Raise Revenue for Other Programs
!
The Health Care Assurance Act of 1997 (S. 24), introduced January 21, 1997,
would extend and expand the FCC’s auction authority, and direct the FCC to
make 100 MHZ of additional spectrum available for auction.
! The Infrastructure Improvement Act of 1997 (H.R. 918), introduced March 4,
1997, would direct the FCC to conduct additional spectrum auctions to raise
$26 billion and make the proceeds available for construction and maintenance
of state highways.
! The Healthy Children’s Pilot Program Act of 1997 (S. 435), introduced March
13, 1997, would extend the FCC’s auction authority from 1998 (when it will
currently expire) to 2002, and expand the authority to include auctions for
noncommercial mobile radio services. The bill would also direct the FCC to
make an additional 100 MHZ available for auction.
In September 1997, the FCC compromised with the provision of a “menu” of
options for C-block licensees to restructure their debt (modified in March 1998). The
options include (1) status quo, in which the licensee would continue making
installment payments; (2) amnesty, in which the licensee would return all of its
licenses and in exchange have its outstanding debt forgiven; (3) disaggregation, in
which the licensee could return half of its spectrum for any or all of its licenses and
in exchange have 50% of its debt forgiven; or (4) pre-payment, in which the licensee
pays for as many of its licenses as it can using 70% of the down-payments it has
already made, plus any additional money it can raise. Even with these special
provisions, some C-block licensees are expected to file for bankruptcy, preventing
the spectrum from being used and forfeiting potential competition in the wireless
market.
800 MHZ SMR Auction. Another FCC auction that met with some disapproval
was the auction for SMR licenses in the 800 MHZ range, completed in December
1997. The FCC originally envisioned the 800 MHZ SMR licenses to be similar to
those created in the 900 MHZ SMR auctions. The main difference, however, was
that many more incumbent SMR licensees existed in the 800 MHZ range than were
in the 900 MHZ range. The incumbents were not only concerned about potential
interference, but also that they would never again be able to request additional
spectrum from the FCC to expand their services.

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After much contention in a proceeding that lasted three years, the FCC adopted
rules for the 800 MHZ licenses, despite the continued dissatisfaction of incumbent
SMR licensees. Their biggest argument against the FCC plan was the FCC’s decision
to require incumbents to relocate to other frequencies after a mandatory negotiation
period with new SMR licensees. Even though the new licensees would have to pay
for the relocation, incumbents argued that being forced off of their current frequency
would influence their current customers to switch their subscription to the new SMR
licensee at that frequency.
A total of 525 licenses were sold in the auction, with three licenses in each of
175 Economic Areas. As expected, one large SMR company, Nextel, won 90 percent
of the licenses. Smaller SMR providers contend that they were not able to compete
against a large entity like Nextel in the auction. Congress might want to investigate
whether the FCC has resolved this since A similar set of issues surrounds the FCC’s
proposals to auction other new services such as the 220 MHZ licenses, paging
systems, and location monitoring services.
Incidents of Collusion. In the PCS auction of D, E, and F Block licenses, held
in late 1996, some bidders complained that competing bidders were using unusual
bid amounts as a means of signaling their market intentions to each other during the
auction. By early 1997, the Department of Justice began an investigation into
bidding practices employed by participants of the PCS auctions. Based on this
investigation, the FCC found specific parties liable for violating FCC auction anti-
collusion rules that prohibit bidders from their bidding strategies with competing
bidders.32 When the investigation began, the FCC modified its bidding procedures
so that all bids must be made in specific increments instead of any dollar amount.
The new procedure was intended to prevent the specific form of collusion from
occurring in the future. This event, however, raises the question over whether other
unforeseen types of collusion might be possible in future FCC auctions.
FCC Recommendations to Congress and Adoption of New Auction Rules.
As a result of these and other problems, the FCC has recommended the following
legislative actions:
33
1) to clarify that FCC licensees who default on their installment payments may not
use bankruptcy litigation to refuse to relinquish their spectrum licenses for re-
auction;”
2) to grant the FCC explicit statutory authority to manage its installment payment
portfolio flexibly;
3) to exempt all auction rulemakings from regulatory requirements of the Contract
With American Advancement Act;
3 2 FCC. Notice of Apparent Liability for Forfeiture (FCC-98-42) for Facilities in the
Broadb and PCS in the D, E, and F Blocks. Adopted March 16, 1998.
FCC
33
Report to Congress on Spectrum Auctions. WT Docket No. 97-150 (FCC 97-
353), released October 9, 1997.

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CRS-24
4) to exempt auction contracts from certain provisions of the Federal Acquisitions
Regulations (FAR); and
5) to modify the statute of limitations for forfeiture proceedings against non-
broadcast licensees from one to three years.
In addition to the above recommendations to Congress regarding its auctions,
the FCC, in December 1997, adopted streamlined auction rules for all services to be
auctioned in the future. The rule changes are intended to ensure uniform auctio
34
n
procedures involving the application, payment, and certain concerns regarding
designated entities (i.e., small businesses, women, minorities and rural telephone
companies). For example, the FCC will specify a minimum opening bid for each
auction, and will provide additional time prior to the start of future auctions for
potential bidders to develop business plans, assess market conditions, and evaluate
the availability of equipment. Congress might consider further investigation into
both the FCC's recommendation and the its new auction rules to determine the merits
or problems that may be associated with each recommendation and the rules that
have been adopted.
Auctions for Broadcast Licenses
The Balanced Budget Act (P.L.105-33) expanded the FCC's authority to conduct
auctions for mutually exclusive licenses applications for certain types of broadcast
stations. Previously, the FCC granted all broadcast licenses through comparative
hearing procedures. After a 1993 court case in which FCC criteria for selecting
license winners was challenged, however, the FCC has stayed all ongoing
comparative hearings pending resolution of the case. As a result of P.L.105-33, the
FCC has proposed to establish auction procedures for all broadcast services that
would be allowed by law. These would include all licenses for new commercia
35
l
radio and television stations filed in the future, as well as some competing
applications for new stations filed before July 1, 1997. The FCC also sought
comment on whether to use auctions for mutually exclusive applications to provide
Instructional Television Fixed Service (ITFS), and on how to resolve pending
proceedings on the renewal of existing broadcast licenses.
In written comments to the FCC, several groups from the broadcasting industry
argued that the proposed auctions should not be used for their particular applications
for licenses. No commenters, however, have argued that auctions for broadcast
licenses should not be used at all. The FCC is currently reviewing the comments, and
a final ruling is expected soon. Some of these groups have also petitioned Members
3 4 FCC WT Docket 97-82, ET Docket 94-32. Third Report and Order and Second
Further NPRM (FCC 97-413)on Streamlining Auction Rules, released December 31, 1997.
3 5FCC NPRM on Competitive Bidding for Commercial Broadcast and Instructional
Television Fixed Services Licenses (MM Docket No. 97-234), Reexamination of the Policy
Statement on Comparative Broadcast Hearings (GC Docket No. 97-52), and Proposals to
Reform the Commission's Comparative Hearing Process to Expedite the Resolution of Cases
(GEN Docket No. 90-264), released November 26, 1997.

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of Congress to direct the FCC to exempt certain types of broadcast licenses from
auction.
Other Spectrum-Related Legislation
Several other bills have been introduced in the 105th Congress that contain
provisions concerning spectrum management and auctions. While to date, none have
moved out of Committee, some of their provisions have been incorporated into the
Budget Act or other legislation. The bills look to spectrum management to serve a
variety of purposes.
! The Department of Commerce Dismantling Act (H.R. 1319), introduced April
14, 1997, would transfer the spectrum management functions of NTIA to the
FCC.
! The Reserve Price Act (S. 663), introduced April 29, 1997, would direct the
FCC to establish a minimum bid for each spectrum license auctioned. If no
bid is received above the minimum amount, the FCC would not be allowed
to auction the license. Provisions of this bill were incorporated into the
Balanced Budget Act, which directed the FCC to establish minimum opening
bids and reasonable reserve prices in all future auctions, unless the FCC
determines that such an assessment is not in the public interest.
! The Digital Television Conversion Act of 1997 (S. 705), introduced May 6,
1997, would establish statutory rules for the conversion of television broadcast
stations from analog to digital transmission consistent with the FCC’s Fifth
Report and Order, and requires DTV licensees to return their analog licenses
by January 1, 2006.
! The Private Wireless Spectrum Availability Act (S. 741), introduced May 14,
1997, would direct the FCC to allocate 12 MHZ of spectrum for private
wireless services. Licensees of this spectrum would pay lease fees based on
the approximate value of the spectrum.
! The Community Broadcasting Protection Act of 1997 (H.R. 1539), introduced
May 6, 1997, would require the FCC to preserve low-power television (LPTV)
stations by granting them status equal to full-power stations, and finding
alternative spectrum on which to locate LPTV stations.
! Communications Satellite Competition and Privatization Act of 1997
(H.R.1872), introduced June 12, 1997, would prohibit the FCC from assigning
by auctions orbital slots or spectrum used for the provision of international or
global satellite communications services.

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