Order Code RL31764
CRS Report for Congress
Received through the CRS Web
Spectrum Management: Auctions
Updated March 21, 2005
Linda K. Moore
Analyst in Telecommunications and Technology Policy
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

Spectrum Management: Auctions
Summary
Spectrum policy issues before Congress are characterized by economic,
technological and regulatory complexity. An increasing number of public comments
have criticized the effectiveness of spectrum management and policy in the United
States. Questions regarding the role of auctions in spectrum management are of
immediate concern because congressional authorization of the existing auction
process expires in 2007. Proceeds from spectrum sales are presently attributed to
general revenue in the U.S. Budget. In the 108th Congress, however, a precedent
was established with the creation of a Spectrum Relocation Fund. This fund will
hold proceeds from specified sales of spectrum currently allocated to federal use;
federal agencies vacating spectrum to be auctioned for commercial use will be
compensated from the fund for costs of relocation. In the 109th Congress, H.R. 1323
(Representative Stupak) is the first of several anticipated bills that would place
auction revenues in special funds for specific purposes. The 108th Congress also
asked for a study regarding the allocation of spectrum licenses, due by October 2005.
The conclusions of this report may lead to changes in spectrum policy and the auction
process. Congress may also consider ways to free valuable spectrum currently
occupied by broadcasters as part of a plan to encourage the move from analog to
digital television (DTV).
Spectrum, a valuable resource governed by available technology, is regulated
by the federal government with the primary objectives of maximizing its usefulness
and efficiency, and to prevent interference among spectrum users. A key component
of spectrum policy is the allocation of bands for specific uses and the assignment of
frequencies within those bands. Auctions, a fairly recent innovation in frequency
assignment, are regarded as a market-based mechanism for allocating spectrum.
Other market-driven policies include licensing fees based on fair-market valuations
of spectrum and flexibility in spectrum usage within assigned bandwidths. Today,
spectrum for commercial applications is typically auctioned to the highest bidder, but
many commercial users have spectrum acquired before the present-day auction
process was implemented.
After years of debate over the idea of using auctions to assign spectrum licenses,
Congress authorized the Federal Communications Commission (FCC) to establish
an auction process to award spectrum licenses for certain wireless communications
services (Omnibus Budget Reconciliation Act of 1993). In the Balanced Budget Act
of 1997 and the Auction Reform Act of 2002, Congress established conditions
regarding some auctions.

Contents
Spectrum Auctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Auction Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Service Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
NextWave . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Spectrum Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Recent Congressional Actions Regarding Spectrum Auctions . . . . . . . . . . . 7
The Balanced Budget Act of 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Auctions of Spectrum Used for Television Broadcasting . . . . . . . . . . . 8
Auction Reform Act of 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Commercial Spectrum Enhancement Act . . . . . . . . . . . . . . . . . . . . . . . 8
Spectrum Management and the 109th Congress . . . . . . . . . . . . . . . . . . . . . . . 9
Intelligence Reform and Terrorism Prevention Act . . . . . . . . . . . . . . . . 9
Administration Plans for Spectrum Policy . . . . . . . . . . . . . . . . . . . . . 10
User License Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
New Trust Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Appendix: Spectrum Technology Basics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
List of Figures
Figure 1: The Electromagnetic Spectrum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Figure 2: Frequency vs. Wavelength . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Figure 3: Schematic Comparing Analog vs. Digital Signals . . . . . . . . . . . . . . . . 14

Spectrum Management: Auctions
Spectrum policy covers both satellite and terrestrial (primarily antenna
broadcast) transmissions. The issues discussed here refer principally to spectrum
management for terrestrial technologies. International satellite frequencies are not
allocated by the auction process.
Radio frequency spectrum 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. Wireless (radio frequency) spectrum
is measured in cycles per second, or hertz (Hz).1 Spectrum allocations are assigned
within bands that are divided into bandwidths or channels with assigned frequencies.
Spectrum is a natural resource2 with a combination of characteristics that
differentiate it from other resources. For example, spectrum is:
! Finite. Today’s technology can only operate on certain frequencies;
commercially viable frequencies are a scarce commodity.
! Renewable. Airwaves used to broadcast any transmission can be
reused after the broadcast is completed.
! Technology dependent. Most natural resources can be harvested
manually, albeit inefficiently. Spectrum is in the atmosphere and is
usable because technology has been developed to exploit the
properties of electromagnetic waves for sound, data and video
transmission.
! A national asset with international rules and regulations. For
example, most domestic uses of spectrum are assigned bands of
operation through the International Telecommunications Union, an
agency of the United Nations; satellites for broadcasting are
governed by international treaty.
! Administered. To avoid interference from competing broadcast
transmissions, frequency assignments must be managed by
recognized authorities.
1 Standard abbreviations for measuring frequencies include kHz — kilohertz or thousands
of hertz; MHz — megahertz, or millions of hertz; and GHz — gigahertz, or billions of hertz.
2 The Code of Federal Regulations defines natural resources as “land, fish, wildlife, biota,
air, water, ground water, drinking water supplies and other such resources belonging to,
managed by, held in trust by, appertaining to, or otherwise controlled by the United
States...” (15 CFR990, Section 990.30).

CRS-2
The development and implementation of better wireless communications
technologies are critical to maximizing the efficiency of spectrum resources.
Spectrum management policies ideally should take into account the impact of new
technology, or — since it is difficult to predict the development paths of new
technologies — allow for flexibility and accommodation in spectrum allocation.
Although flexibility may be desirable in policy-making, most existing wireless
technologies are inflexibly constructed to work on a limited range of specific
frequencies. Relocation from one part of the spectrum to another can require costly
equipment changes. Therefore, reallocation of spectrum to new uses is often
expensive as well as technically and administratively difficult. Additionally, some
uses of spectrum are governed by international regulations.
Spectrum policy originated in the need to manage frequency assignments.
Auctions are a market-driven solution to allocating frequencies. Auctions are a
recent innovation in spectrum management and policy. The auction process assigns
a monetary value to spectrum. The Federal Communications Commission (FCC)
manages all non-federal spectrum, including that used by state and local
governments. Among other responsibilities, the FCC supervises spectrum auctions.
The National Telecommunications and Information Administration (NTIA) manages
all spectrum used by the federal government, including the Department of Defense
(DOD). The NTIA — part of the Department of Commerce — also serves as the
principal adviser to the executive branch on domestic and international
telecommunications issues. The NTIA and the FCC work together to coordinate
spectrum policy.
Many economic models for providing the “highest and best use” for spectrum
exist and have been tried, both in the United States and worldwide. Spectrum for
what is widely described as “prime” frequencies (300 MHZ - 3000 MHZ) is judged
by many to be the most commercially desirable and is widely sought after at auction
by competing interests.3 Several lucrative auctions have added billions to the federal
treasury, applied to general revenue.
Spectrum Auctions
Because two or more signal transmissions over the same frequency in the same
location at the same time could cause interference (a distortion of the signals), the
FCC, over many years, has developed and refined a system of exclusive licenses for
users of specific frequencies.4 Traditionally, the FCC granted licenses using a
process known as “comparative hearings” and later using lotteries. After years of
debate over the idea of using competitive bidding (i.e., auctions) to assign spectrum
licenses, the Omnibus Budget Reconciliation Act of 1993 (47 U.S.C. 927) added
3 Federal Communications Commission, Office of Plans and Policy, OPP Working Paper
Series No. 38, “A Proposal for a Rapid Transition to Market Allocation of Spectrum,”
November 2002 [http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-228552A1.pdf].
Viewed January 19, 2005.
4 Technically, two signals will interfere with each other even if they are not at the same
exact frequency, but are close in frequency. To avoid harmful interference, the frequencies
must have frequencies that are sufficiently different, known as a “minimum separation.”

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Section 309(j) to the Communications Act, authorizing the FCC to use auctions to
award spectrum licenses for certain wireless communications services. Additional
provisions concerning auctions were included in the Balanced Budget Act of 1997,
discussed below. The main category of services for which licenses may be auctioned
are called Commercial Mobile Radio Services (CMRS) which include Personal
Communications Service (PCS), cellular, and most Specialized Mobile Radio (SMR)
and Mobile Satellite Services (MSS). With some exceptions, CMRS providers are
regulated as common carriers to ensure regulatory parity among similar services that
will compete against one another for subscribers. The FCC has the authority 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 when services are primarily subscription-based. The FCC does
not have authority to reclaim licenses awarded prior to the decision to permit
auctions.
Auction Rules. The Communications Act of 1934 directs the FCC to develop
a competitive bidding methodology.5 The FCC initially developed rules for each
auction separately (with some common elements), but after several years of trial and
error it has developed a set of general auction rules and procedures. While there may
be special requirements for specific auctions, the following rules generally apply. 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 bidding in which the FCC accepts bids on a large set of related
licenses simultaneously, using electronic communications. Bidders can bid in
consecutive rounds on any license offered until all bidding has stopped on all
licenses. 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.6
For some auctions, the FCC gives 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. In the first year or so of auctions,
the FCC originally also gave special provisions to women-owned, minority-owned,
and rural telephone companies (called designated entities). After a 1995 Supreme
Court decision determined that government affirmative action policies must pass a
“strict scrutiny” test to demonstrate past discrimination, the FCC removed minority-
owned and women-owned groups from its list of businesses qualifying for bidding
credits as designated entities.7 Many industry observers have expressed concern that
some of the small businesses participating in auctions actually represent larger
5 Communications Act of 1934, 47 U.S.C. 309 (j) (3).
6 The FCC provides information on auctions at [http://wireless.fcc.gov/auctions/]. Viewed
February 17, 2005
7 Adarand Constructors Inc., petitioner v. Federico Pena, Secretary of Transportation, et al.
Docket No. 93-1841, decided June 1995.

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companies. Larger companies reportedly lament the limitations of the designated
entity rule in auctions and have lobbied the FCC to eliminate it.8
Service Rules. 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. The FCC’s plan for the amount of
spectrum per license, the number of licenses, and the conditions for use of the
designated spectrum, known as the “band plan,” is developed for each new wireless
service. 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), economic areas (EAs), and major
economic areas (MEAs) — defined by the Department of Commerce for economic
forecasts — are also used by the FCC to describe areas of coverage for some
spectrum auctions.
The FCC has also modified 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 spectrum
purchased in the PCS auctions.
NextWave. The auction of one of the blocks of spectrum allocated for PCS,
known as the C-block, presented legal problems for the FCC. In the original 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. Winning bidders
only had to pay 10% down and the remainder could be paid over ten years at below-
market interest rates. At auction in 1996, broadband C- block licenses were sold for
bids totaling $10.2 billion. By mid-1997, however, many of the license winners
(most notably NextWave Telecom Inc.) had defaulted. In September 1997, the FCC
offered a set of options for C-block licensees to restructure their debt (that offer was
modified in March 1998). Some licensees opted to maintain their bankrupt status,
however, preventing the C-block spectrum from being re-auctioned. Based on its
interpretation of a series of decisions in 1999 and 2000 by a U.S. Court of Appeals,
the FCC cancelled the licenses that had not been paid for and re-auctioned that
spectrum. The auction (Auction 35) for the defaulted licenses was completed January
26, 2001, and booked $16.86 billion in projected revenue for the general treasury.9
On June 22, 2001, the United States Court of Appeals for the District of
Columbia found that the FCC did not have the legal right to take back NextWave’s
licenses and that 216 of the licenses (worth $15.85 billion) still belonged to
8 Communications Daily, “FCC Expected to Reject Changing Auction Rules,” page 3, June
18, 2004.
9 Summarized in Associated Press Online, “Feds Ordered to Return Wireless Licenses,”
January 28, 2003.

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NextWave rather than to the winners of the later auction, such as Verizon Wireless.10
The U.S. Supreme Court agreed to hear the case, essentially weighing NextWave’s
right to protection under bankruptcy laws against the FCC’s right to allocate
spectrum. On January 27, 2003, the Supreme Court ruled in favor of NextWave,
agreeing with the earlier Court of Appeals decision that the FCC did not have the
authority to recover the licenses.11 Subsequently, NextWave agreed to return some
of the disputed spectrum to the FCC for re-auction in January 2005.12
Spectrum Value
Spectrum value depends on many factors, such as the amount of spectrum, its
frequencies (since signal 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 alternative 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.
The Congressional Budget Office (CBO) annually scores the anticipated receipts
from planned spectrum auctions, and includes the revenue estimate in its annual
report, The Budget and Economic Outlook. The January 2005 report estimated
receipts from the sale of spectrum at $15 billion over the period 2006 through 2015.13
The revenue expected from the auctions is used as offsetting receipts to other federal
expenditures. In accordance with the Budget Enforcement Act of 1990, auction
proceeds cannot be used for funding other programs.
To date, the FCC has garnered over $14 billion from completed auctions, most
of which has been deposited in the U.S. Treasury as general revenue to the federal
government. (The FCC keeps a small portion of auction proceeds to cover the
expenses of the auctions.) This total does not include approximately $10 billion for
contested licenses in the C and F Blocks awarded to NextWave and others in 1996
— some of which may be recovered. NextWave, which owes $4.6 billion for
licenses, has agreed to repay its creditors in full, including the FCC, as part of the
10 254 Federal Report, 3d Series, page 130.
11 U.S. Supreme Court, Docket No. 01-653 at [http://www.supremecourtus.gov/docket/01-
653.htm]. Viewed January 19, 2005.
12 See FCC Report No. AUC-03-58 (Auction No. 58), “Broadband PCS Spectrum Auction
Scheduled for January 12, 2005,” available at [http://wireless.fcc.gov/auctions/]. The results
of Auction 58 are also at this site.
13 The Budget and Economic Outlook: Fiscal Years 2006 - 2015, Table 3-4. CBO does not
break down the amounts in terms of individual auctions, but only provides the aggregate
estimated revenue.

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reorganization plan that will allow it to emerge from bankruptcy.14 It has concluded
sales of some of the contested licenses to Verizon Wireless ($3.93 billion) and
Cingular Wireless ($1.4 billion).15 The spectrum that NextWave returned to the FCC
for re-auction grossed $2.2 billion before bidding credits of approximately $2
million.16
Technology
Several technological advances could affect the outcome and prospects for
spectrum auctions and how the spectrum is managed. The usable spectrum for
communications purposes is currently considered to be below 300 GHz. Higher
frequencies present limitations such as a greater absorption of signals by the
atmosphere and difficulties in high frequency reception. As the technology for radio
transmission and reception improves, higher frequencies will likely become available
for use. Technology improvements may, in turn, spur increased consumer demand
for spectrum.
Some of the problems with high-frequency signal transmission and signal
interference at all frequencies are being solved by engineering techniques which
could make better use of the spectrum, thus reducing some of the need for more
spectrum. Technologies 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
digital techniques such as frequency hopping, in which the transmitted signal avoids
frequencies that are already being used.
Advances in software defined radio (SDR) and cognitive radio, in particular,
may in time change the nature of spectrum allocation policies. Software defined
networks (radios, base stations, antennae) move wireless communications away from
hard-wired equipment, where functionality is built into the components at the factory,
by allowing changes in parameters to be downloaded remotely. Parameters that can
be changed include standards and frequency assignments. Cognitive radio has the
potential to eliminate entirely the need for frequency assignments. Simply put,
cognitive radio is able to seek out and use any available frequency through
miniaturized software programs contained within radio equipment. Advanced
versions of software-defined radio (SDR) being tested today are the building blocks
for commercial applications of cognitive radio.
The Department of Defense (DOD), its agencies, and military departments have
been leaders in research and development for software-programmable radios and base
centers. A key program is the Joint Tactical Radio System (JTRS), designed to help
14 “FCC Approves NextWave License Sale,” v Shannon D. Murray, Daily Deal/The Deal,
March 7, 2005.
15 NextWave Bankruptcy Plan Approved,” by Jason Ankeny, Telephony Online, March 2,
2005.
16 FCC News, February 16, 2005, “Broadband PCS Spectrum Auction Closes, Raising Over
$2 Billion,”Headlines at [http://www.fcc.gov].

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the military migrate from its current wireless technology to SDR.17 DOD is
promoting the use of JTRS and its software communications architecture for
homeland security, public safety, and commercial applications.18
Recent Congressional Actions Regarding Spectrum Auctions
Congress uses its oversight authority of the FCC to correct the agency’s course
or to steer it in new directions. Notable laws that deal with spectrum policy and
auctions are the Balanced Budget Act of 1997, the Auction Reform Act of 2002 and
the Commercial Spectrum Enhancement Act of 2004. The Balanced Budget Act also
directs FCC actions concerning the transition to digital televison, an event with
significant impact on spectrum management.
The Balanced Budget Act of 1997. The Balanced Budget Act of 1997 (47
U.S.C. 153) contained several spectrum management provisions. It amended Section
309(j) of the Communications Act to expand and broaden the FCC’s auction
authority and to modify other aspects of spectrum management. Whereas previous
statutes gave the FCC the authority to conduct auctions, the Balanced Budget Act
required the FCC to use auctions to award ownership in mutually exclusive
applications for most types of spectrum licenses. It directed the FCC to experiment
with combinatorial bidding (i.e., allowing bidders to place single bids on groups of
licenses simultaneously), and to establish minimum opening bids and reasonable
reserve prices in future auctions unless the FCC determined that it was not in the
public interest. This amendment also gave the FCC auction authority until
September 30, 2007. Furthermore, the act directed the FCC to allocate spectrum for
“flexible use,” which means defining new services broadly so that services can
change as telecommunications technology evolves.
Exempted from auctions are licenses or construction permits for: “(A) public
safety radio services, including private internal radio services used by state and local
governments and non-government entities and including emergency road services
provided by not-for-profit organizations, that —
(i) are used to protect the safety of life, health , or property; and
(ii) are not made commercially available to the public;
(B) digital television service given to existing terrestrial broadcast
licensees to replace their analog television service licenses; or
(C) noncommercial educational broadcast stations and public broadcast
stations.”
Examples of services exempted from auctions include utilities, railroads,
metropolitan transit systems, pipelines, private ambulances, volunteer fire
departments, and not-for-profit emergency road services.
The act directed the FCC to auction 120 MHz of spectrum, most of which had
already been transferred by NTIA from federal to non-federal assignment and to
17 See [http://jtrs.army.mil/]. Viewed February 9, 2005.
18 Overview at [http://jtrs.army.mil/sections/overview/fset_overview_domestic.html].
Viewed February 9, 2005.

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allocate another 55 MHz located below 3 GHz for auction not later than September
2002.19 These deadlines were subsequently eliminated by the Auction Reform Act.
Auctions of Spectrum Used for Television Broadcasting. The
Balanced Budget Act of 1997 required the FCC to conduct auctions for 78 MHz of
the analog television spectrum planned to be reclaimed from television broadcasters
at the completion of the transition to digital television and to allocate 24 MHz for
public safety services. For administrative purpose, the FCC divided the spectrum
into “Upper 700 MHz” and “Lower 700 MHz”bands. Congress instructed the FCC
to hold auctions for the 700 MHz frequencies not later than 2002. The spectrum was
to have been auctioned in 2002 but not reclaimed from broadcasters until at least
2006. The act directed the FCC to grant extensions to stations — allowing them to
keep the spectrum — in television markets where any one of the following three
conditions exist: (1) if one or more of the television stations affiliated with the four
national networks are not broadcasting a digital television signal, (2) if digital-to-
analog converter technology is not generally available in the market of the licensee,
or (3) if at least 15% of the television households in the market served by the station
do not subscribe to a digital “multi-channel video programming distributor” (e.g.,
cable or satellite services) and do not have a digital television set or converter. Until
these conditions are met, broadcasters are not required to surrender the spectrum.20
Auction Reform Act of 2002. Concerns about spectrum management,
including spectrum used for public safety, prompted the introduction of the Auction
Reform Act of 2002 (P.L. 107-195). Among the purposes of the act is the
elimination of deadlines for auctions of Upper and Lower 700 MHz frequencies
originally scheduled by the FCC for 2002. Specifically, the law stopped auctions in
the Upper 700 MHz band that might have impacted efforts to increase the amount of
spectrum available for public safety use, while requiring that some auctions in the
Lower 700 MHz band take place. The broad language of the law gives the FCC
discretion in setting auction dates for all auctionable spectrum by eliminating
deadlines established by the Balanced Budget Act of 1997.
Commercial Spectrum Enhancement Act. This act created the Spectrum
Relocation Fund to provide a mechanism whereby federal agencies can recover the
costs of moving from one spectrum band to another. The interest in relocating
federal users — and accelerating the process by assuring reimbursement for the costs
of moving — centers on valuable spectrum (relative to auction prices for comparable
spectrum in the United States and other countries) now used by federal agencies,
especially the Department of Defense. In particular, spectrum in bands within the
1710-1850 MHz range is sought by wireless telecommunications companies to
facilitate the implementation of next-generation wireless technologies, including
19 Demand for this spectrum is discussed in CRS Report RS20993, Wireless Technology
and Spectrum Demand: Third Generation (3G) and Beyond.

20 See CRS Report RS21570, Spectrum Management: Public Safety and the Transition to
Digital Television.


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high-speed mobile services (3G).21 After much study, the NTIA and the FCC, aided
by an Intra-Government 3G Planning Group, announced plans to provide for the
transfer of spectrum in the 1710-1755 MHz range from federal agencies.
Frequencies in this band would be made available to the private sector through
spectrum auctions conducted by the FCC. As part of the effort, the need was
identified for new legislation that would permit affected federal agencies to recover
costs directly from these auction proceeds. In mid-2002 the Department of
Commerce proposed the creation of a Spectrum Relocation Fund. This fund could
provide a means to make it possible for federal agencies to recover relocation costs
directly from auction proceeds when they are required to vacate spectrum slated for
commercial auction. In effect, successful commercial bidders would be covering the
costs of relocation. To accomplish the NTIA and FCC goals, the Communications
Act of 1934 would need to be modified to permit the agencies direct access to
auction funds. This was accomplished with the passage of the Commercial Spectrum
Enhancement Act, Title II of P.L. 108-494. Following the requirements of the act,
the FCC has announced that it wants to schedule these auctions beginning as early
as June 2006.22
Spectrum Management and the 109th Congress
A pressing issue in spectrum policy reform regards spectrum auctions. The
FCC’s auction authority expires at the end of FY2007. To ensure continuity, by that
time Congress must pass legislation either to extend the existing authorization or to
modify the laws governing spectrum auctions. The issue is bipartite: both the manner
of spectrum allocation (auction or other method) and the use of the proceeds are of
importance and interest to Congress. Congress may consider reviewing the roles of
the FCC and NTIA in implementing spectrum policy. The Government
Accountability Office (GAO) in a study released in 2002,23 was critical of FCC and
NTIA spectrum management policies. Among its recommendations was a suggestion
that the NTIA and FCC prepare reports for Congress on developing a national
spectrum policy. The GAO report contends that the United States is lacking a
cohesive policy, with negative consequences both domestically and in international
negotiations. A follow-on report from the GAO, released in early 2003,24
recommended that Congress consider establishing an independent commission to
evaluate the need for spectrum management reform.
Intelligence Reform and Terrorism Prevention Act. Several passages
of the act (P.L. 108-458) deal with spectrum policy. For example, Title VII, Subtitle
E — Public Safety Spectrum recognizes the merits of arguments for increasing the
amount of spectrum at 700 MHz available for public safety and homeland security.
21 Discussed in CRS Report RS20993, Wireless Technology and Spectrum Demand: Third
Generation (3G) and Beyond
.
22 See CRS Report RS21508, Spectrum Management: Special Funds.
23 Better Coordination and Enhanced Accountability Needed to Improve Spectrum
Management
, GAO-02-906, September 30, 2002
24 Comprehensive Review of U.S. Spectrum Management with Broad Stakeholder
Involvement Is Needed
, GAO-03-277, January 31, 2003.

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It requires the FCC, in consultation with the Secretary of Homeland Security and the
NTIA, to conduct a study on the spectrum needs for public safety, including the
possibility of increasing the amount of spectrum at 700 MHz.25 The study is to be
submitted by year-end 2005. The act conveys the sense of Congress that the first
session of the 109th Congress must act to establish a comprehensive approach to the
timely return of spectrum at 700 MHz currently held by television broadcasters.26
Administration Plans for Spectrum Policy.On November 30, 2004,
President George W. Bush issued a memorandum to the heads of Executive
Departments and agencies regarding steps to be taken to improve the management
of spectrum assigned for federal use.27 Most of these steps are to implement
recommendations made by the Federal Government Spectrum Task Force in its
report to the President in June 2004.28 The memorandum states,

“The existing legal and policy framework for spectrum management has not kept
pace with the dramatic changes in technology and spectrum use. Under the
existing framework, the Federal Government generally reviews every change in
spectrum use. This process is often slow and inflexible and can discourage the
introduction of new technologies. Some spectrum users, including Government
agencies, have argued that the existing spectrum process is insufficiently
responsive to the need to protect current critical uses.”
To address this, a multi-step planning process will pull together analyses of
spectrum needs. Notably the Secretary of Homeland Security will lead the
preparation of a Spectrum Needs Plan, “to address issues related to communication
spectrum used by the public safety community, as well as the continuity of
Government operations.” Concurrently, the Secretary of Commerce will be
developing a Federal Strategic Spectrum Plan. These two plans, due by the end of
2005, will form the backbone of a National Strategic Spectrum Plan.
User License Fees. The President’s budget for FY2004 and again for 2006
proposed that 1) the FCC’s authority to conduct auctions be extended indefinitely;
2) user fees be levied on unauctioned licensed spectrum; and 3) broadcasters pay an
annual lease fee on analog TV spectrum that they are holding as part of the
Congressionally-mandated transition to digital television.29 Congress, in the
Commercial Spectrum Enhancement Act, requires the Comptroller General of the
Government Accountability Office (GAO) to examine “national commercial
25 P.L. 108-458, Title VII, Subtitle E, Sec. 7502 (a).
26 P.L. 108-458,Title VII, Subtitle E, Sec. 7501 (b) (1).
27 “Presidential Determination: Memorandum for the Heads of Executive Departments and
Agencies,” November 30, 2004, Office of the Press Secretary, News & Policies, at
[http://www.whitehouse.gov/news/releases/2004/11/20041130-8.html]. Viewed January 19,
2005.
28 Spectrum Policy for the 21st Century: The President’s Spectrum Policy Initiative.
29 The Budget for Fiscal Year 2006, pp. 329-330. In his budget for 2005, the President
supported proposals for indefinitely extending the FCC’s auction authority and giving the
FCC the authority to set user fees on unauctioned spectrum.

CRS-11
spectrum policy as implemented by the Federal Communications Commission and
report on its finding before October 2005.”30 The GAO is to examine the impact of
auctioning licenses on the economic climate for broadcast and wireless technologies.
It is to assess whether the holders of spectrum licenses received before the auction
process was instituted (i.e., largely for free) have an economic advantage over license
holders that have purchased spectrum through the auction process. The GAO is also
to evaluate whether the disparate methods of allocating spectrum have had an adverse
impact on the introduction of new services. The conclusions of the study are to be
reviewed in the context of the Administration proposal to introduce license user fees
on assigned (not auctioned) licenses and an evaluation provided for Congress
regarding the impact of assessing license fees on the competitiveness of the wireless
and broadcast industries.31
New Trust Funds. Building on the precedent of establishing a trust fund to
pay for specific purposes, Representative Stupak has introduced the Public Safety
Interoperability Implementation Act (H.R. 1323), a bill that would place some
auction proceeds in trust for grants to improve public safety communications. The
introduction of other bills creating trust funds for specific purposes is anticipated.32
The Public Safety Interoperability Implementation Act33 would establish in the U.S.
Treasury a Public Safety Communications Trust Fund34 to be funded in part with
annual appropriations of $500 million for each of three fiscal years,35 and in part with
a percentage of certain spectrum auction proceeds.36 The fund is to be administered
by the NTIA, in consultation with a board of five directors appointed by the Secretary
of Commerce. The board is to consult with the Department of Homeland Security,
which may also be represented by one or more members on the board.37 The NTIA
Administrator is to make grants from the fund “to implement interoperability and
modernization . . . for the communications needs” of public safety organizations and
related agencies or entities.38 Preference for grants is to be given to those proposing
inter-agency or regional and multi-jurisdictional interoperability programs.39

30 P.L. 108-494, Title II, Sec. 209 (a).
31 P.L. 108-494, Title II, Sec. 209 (a) (5).
32 “Democrats Again Seek to Pump Spectrum Money into Education Technology,” by Joelle
Tessler, CQ Today - Technology & Communications, February 25, 2005.
33 For a discussion of interoperability and its role in public safety communications, see CRS
Report RL32594, Public Safety Communications: Policy, Proposals, Legislation and
Progress.
34 H.R. 1323, Sec. 3, “Sec. 106 “(a) “(1). (Pre-publication edition.)
35 H.R. 1323, Sec. 3, “Sec. 106 “(f). (Pre-publication edition.)
36 H.R. 1323, Sec. 3, “Sec. 106 “(a) “(2). (Pre-publication edition.)
37 H.R. 1323, Sec. 3, “Sec. 106 “(b) “(1). (Pre-publication edition.)
38 H.R. 1323, Sec. 3, “Sec. 106 “(c) “(1). (Pre-publication edition.)
39 H.R. 1323, Sec. 3, “Sec. 106 “(c) “(2). (Pre-publication edition.)

CRS-12
Conclusion
Spectrum is a natural resource with its own unique set of characteristics. Most
assigned spectrum was allocated prior to the adoption of the auction process. The
amount of spectrum available for new uses, given current technology, is limited; the
amount available for commercial use and development is smaller still.
Auctions are the primary mechanism used for implementing market-based
spectrum allocation policies in the United States. Auctions as a means of allocating
spectrum are considered a success by many observers because of 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 are most likely to 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.40 However, many
have questioned whether auction policy should be supplemented more aggressively
with other market-driven solutions such as licensing fees and whether the existing
auction process and administration can be improved.41 In particular, a number of
wireless companies are perceived to have a competitive advantage because they were
granted large blocks of spectrum before the auction process was put in place. Newer
entrants to wireless communications have had to purchase spectrum at market prices
to compete with the entrenched companies.
Spectrum management is an exercise in reconciling divergent interests. Over
time, developments in technology may significantly increase the amount of useable
spectrum and consequently the ease with which a policy of equitable allocation and
use can be crafted. For the immediate future, Congress may choose to debate and act
on questions such as reforming spectrum management and allocation mechanisms.
Some observers argue that a fully-developed policy should take into account issues
such as international competitiveness, the communications needs of public safety
agencies and the military, the role of wireless technology in economic growth, and
the encouragement of new technologies that make spectrum use more efficient and
more beneficial to society as a whole. The stated objective of most policy reformers
is a coherent national policy that provides the proper balance for existing applications
while at the same time providing opportunities for future growth and development.
40 FCC 97-353, FCC Report to Congress on Spectrum Auctions, WT Docket No. 97-150,
released October 9, 1997.
41 The GAO, among others, analyzes auction policies and documents alternative mechanisms
inComprehensive Review of U.S. Spectrum Management with Broad Stakeholder
Involvement Is Needed
, GAO-03-277, January 31, 2003.


CRS-13
Appendix: Spectrum Technology Basics
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 radio frequency spectrum is the portion of electromagnetic spectrum that carries
radio waves. Figure 1 shows the radio spectrum as part of the measured
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,
in cycles per second, or hertz (Hz).42 The relationship between frequency (f) and
Figure 1: The Electromagnetic Spectrum
wavelength (8) is depicted in Figure 2. Bandwidth is a measure of how fast data are
transmitted or received whether through wires, air or space. Signals are transmitted
over a range of frequencies which determines the bandwidth of the signal. Thus a
system that operates on frequencies between 150 and 200 MHz has a bandwidth of
50 MHz.43 In general, the greater the bandwidth, the more information that can be
transmitted.
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 dividing line between broadband and narrowband
is not always clear, and changes as technology evolves.
42 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.
43 Bandwidth is also measured in bits per second (bps) instead of cycles per second.
especially in digital systems.



CRS-14
Two other important terms are analog signals and digital signals, depicted in Figure
3. 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 (i.e.,
Figure 2: Frequency vs. Wavelength
the signal is directly analogous to
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 a
greater capacity for sending
information. Analog signals have
the advantage of greater fidelity to
the source, although that advantage
can be made very small by
increasing the rate at which signals
are digitized. Digital signals are
acknowledged to be superior to
analog signals for the majority of applications.
Electromagnetic waves have many characteristics that govern how spectrum can
be used in telecommunications systems. For example, antennas are used for
transmitting and receiving signals, and can be designed to transmit in all directions
or can be directed toward specific receivers. Receiving antennas are typically aligned
with the transmitting antenna to maximize signal reception, but unintended signals
can still interfere with the reception of the information sent. To avoid signal
interference from stray signals, more than one radio signal usually cannot be
transmitted in the same frequency range, at the same time, in the same area. Another
characteristic is that 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.
Figure 3: Schematic Comparing Analog vs. Digital
Signals