Order Code RL31764
CRS Report for Congress
Received through the CRS Web
Spectrum Management: Auctions
Updated April 6, 2006
Linda K. Moore
Analyst in Telecommunications and Technology Policy
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

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Spectrum Management: Auctions
Summary
Spectrum policy issues before Congress are characterized by economic,
technological and regulatory complexity. Of particular interest to policy makers are
the allocation of spectrum for specific types of use (such as TV broadcasting, radio,
advanced wireless services, or unlicensed) and the assignment of licenses for
exclusive or shared use of specific frequencies. Today, most frequencies allocated
for commercial uses are assigned through auctions, with licenses going to the highest
bidder. Many wireless companies and most broadcasters hold licenses received at
little cost before the introduction of auctions. Another important allocation of
spectrum is for unlicensed use. Both commercial and non-commercial entities use
unlicensed spectrum to meet a wide variety of monitoring and communications
needs. Suppliers of wireless devices must meet requirements for certification to
operate on frequency bands designated for unlicensed use. Examples of unlicensed
use include baby monitors, garage door openers, and wi-fi communications.
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, the Deficit Reduction Act (P.L. 109-171)
includes provisions that will hold part of certain auction proceeds (700 MHz band)
in a Digital Television Transition and Public Safety Fund. The fund mainly would
assist the transition from analog televison broadcasting to digital broadcasting, and
would contribute to programs for public safety. Over $7 billion would go toward
deficit reduction. Auctions would be required to begin not later than January 28,
2008. A bill to fund public safety communications through auction revenues was
previously introduced by Congressman Bart Stupak (H.R. 1323).
Among proposed bills that would influence spectrum management are H.R.1661
(Representative Rush) and S. 1767 (Senator Snowe). H.R. 1661 would create a new
category of loan within the Small Business Administration to help qualifying
companies bid in spectrum auctions or buy spectrum in the secondary market. S.
1767 would require the Federal Communications Commission to reconfigure the 700
MHz band plan (allocation of frequencies to be auctioned) to include spectrum to be
licensed for small geographic areas, with special consideration for the needs of
regional and smaller wireless carriers. S. 2327 (Senator Allen) and S. 2332 (Senator
Stevens) with its companion bill (H.R. 5085, Representative Inslee) would allocate
new frequencies for unlicensed use, notably wireless broadband.
This report will be updated.

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Contents
Spectrum Auctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Auction Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Service Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
NextWave . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Spectrum Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Unlicensed Spectrum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Recent Congressional Actions Regarding Spectrum Auctions . . . . . . . . . . . 8
The Balanced Budget Act of 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Auctions of Spectrum Used for Television Broadcasting . . . . . . . . . . . 9
Auction Reform Act of 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Commercial Spectrum Enhancement Act . . . . . . . . . . . . . . . . . . . . . . . 9
Budget Reconciliation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Spectrum Management and the 109th Congress . . . . . . . . . . . . . . . . . . . . . . 10
Intelligence Reform and Terrorism Prevention Act . . . . . . . . . . . . . . . 10
Administration Plans for Spectrum Policy . . . . . . . . . . . . . . . . . . . . . 11
License Fees and Spectrum Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Other Trust Fund Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Small Business Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Rebanding Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Unlicensed Spectrum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Appendix: Spectrum Technology Basics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
List of Figures
Figure 1. The Electromagnetic Spectrum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Figure 2. Frequency vs. Wavelength . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Figure 3. Schematic Comparing Analog vs. Digital Signals . . . . . . . . . . . . . . . 16

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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 are managed by recognized
authorities.
The development and implementation of better wireless communications
technologies are critical to maximizing the efficiency of spectrum resources.
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 CFR 990, Section 990.30).

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CRS-2
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 to manage frequency allocation and license assignments has
evolved over the years in response to changes in technology and market demand,
among other factors. Auctions are a market-driven solution to assigning licenses to
use specific frequencies and are a recent innovation in spectrum management and
policy. The auction process assigns a monetary value to spectrum through
competitive bidding. 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.
Some have suggested that the commercial policies followed by the FCC to
conduct auctions are not compatible with the management of spectrum for non-
commercial use. It has been proposed that the NTIA take over the management of
frequencies used by public safety agencies, critical infrastructure industries, and other
non-federal entities where the use of wireless communications is essential to
protecting life and property. This action, it is argued, would enable the NTIA to
work more closely with the Department of Defense, federal departments such as
Homeland Security, and local and state agencies to develop band plans for emergency
communications. Although this does not change the role of congressional
jurisdiction, such a move could streamline the coordination of public policy for
interoperable communications and other goals Congress has set for improving
emergency preparedness and response.
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.
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, 2006.

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CRS-3
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 In the recent past, the FCC has granted licenses using
a process known as “comparative hearings” and used 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 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,
the Auction Reform Act of 2002, the Commercial Spectrum Enhancement Act, and
the Deficit Reduction Act of 2005 — all discussed below. The main category of
services for which licenses may be auctioned are called Commercial Mobile Radio
Services (CMRS), which include Advanced Wireless Services (AWS), 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. In accordance with the Budget Enforcement Act of 1990, and provisions
in the Communications Act of 1934, as amended, auction proceeds cannot be used
for funding other programs.5 Creation of two important trust funds — the Spectrum
Relocation Fund and the Digital Television and Public safety Fund — required new
language and amendments to existing law.
Auction Rules. The Communications Act of 1934, as amended, directs the
FCC to develop a competitive bidding methodology.6 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
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.”
5 47 U.S.C. 309 (j) (8).
6 Communications Act of 1934, 47 U.S.C. 309 (j) (3).

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CRS-4
understood that license winners will be able to keep the license perpetually, as long
as they comply with FCC rules.7
For some auctions, the FCC gives 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.8 Many industry observers have expressed concern that some
of the small businesses participating in auctions actually represent larger companies.9
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
7 The FCC provides information on auctions at [http://wireless.fcc.gov/auctions/]. Viewed
January 23, 2006.
8 Adarand Constructors Inc., petitioner v. Federico Pena, Secretary of Transportation, et al.
Docket No. 93-1841, decided June 1995.
9 Communications Daily, “FCC Pushing Hard to Make June AWS Auction Goal,” January
23, 2006 and “FCC Scrutinizing Carrier-DE Ties in Advance of Rulemaking, January 23,
2006.

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CRS-5
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.10
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
NextWave rather than to the winners of the later auction, such as Verizon Wireless.11
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.12 Subsequently, NextWave agreed to return some
of the disputed spectrum to the FCC for re-auction in January 2005.13
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 estimate provided in the January
2006 report does not include estimates for the auction of spectrum at 700 MHz,
10 Summarized in Associated Press Online, “Feds Ordered to Return Wireless Licenses,”
January 28, 2003.
11 254 Federal Report, 3d Series, p. 130.
12 U.S. Supreme Court, Docket No. 01-653 at [http://www.supremecourtus.gov/docket/01-
653.htm]. Viewed January 19, 2006.
13 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.

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CRS-6
released by the Deficit Reduction Act. Taking this planned auction into account,
CBO projects auction receipts of $25 billion in the period 2006-2010.14
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
reorganization plan that will allow it to emerge from bankruptcy.15 It has concluded
sales of some of the contested licenses to Verizon Wireless ($3.93 billion) and
Cingular Wireless ($1.4 billion).16 The spectrum that NextWave returned to the FCC
for re-auction grossed $2.2 billion before bidding credits of approximately $2
million.17
Unlicensed Spectrum
Unlicensed spectrum is not sold to the highest bidder and used for the services
chosen by the license-holder but is instead accessible to anyone using wireless
equipment certified by the FCC for those frequencies. Among the advantages of
unlicensed spectrum is the opportunity to test new technology directly with
consumers instead of going through spectrum license-holders. One of the
disadvantages of unlicensed spectrum is the possibility of interference among the
transmissions of the various users, both within the assigned bandwidth and with other
bandwidths.
Some advocates for unlicensed spectrum would like to see spectrum set aside
in the 700 MHz band, where channels will be released by television broadcasters as
they move from analog to digital transmission. An alternative proposal for providing
unlicensed spectrum as part of the DTV transition is to designate so-called “white
spaces” among the new digital TV channels. To avoid interference among TV
station broadcasts, channels are assigned in one market area and left vacant in
adjoining areas. For example, channel 7 is used in the New York City area and in the
Washington, DC area, but not in Baltimore. In Baltimore, spectrum designated for
channel 7 is vacant and could be used for unlicensed purposes. Beginning in May
14 The Budget and Economic Outlook: Fiscal Years 2007-2016, Table 3-5, January 2006,
does not take into account passage of the Deficit Reduction Act, which will add another $10
billion to $15 billion. Revised estimates for the period 2006-2010 are in Congressional
Budget Office Cost Estimate, S. 1932, Deficit Reduction Act of 2005, January 27, 2006,
page 22, at [http://www.cbo.gov/showdoc.cfm?index=7028&sequence=0].
15 “FCC Approves NextWave License Sale,” by Shannon D. Murray, Daily Deal/The Deal,
March 7, 2005.
16 NextWave Bankruptcy Plan Approved,” by Jason Ankeny, Telephony Online, March 2,
2005.
17 FCC News, February 16, 2005, “Broadband PCS Spectrum Auction Closes, Raising Over
$2 Billion,” Headlines at [http://www.fcc.gov].

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CRS-7
2004, the FCC requested comment on proposals for considering the use of spectrum
in television broadcast bands (Docket No. 04-186) but has yet to reach a decision.
Representatives of the televison broadcast industry have filed comments containing
engineering studies that suggest harmful interference would occur; other studies
suggest no significant interference would occur.
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
the military migrate from its current wireless technology to SDR.18 DOD is
promoting the use of JTRS and its software communications architecture for
homeland security, public safety, and commercial applications.19
18 See [http://jtrs.army.mil/]. Viewed January 9, 2006.
19 Overview at [http://jtrs.army.mil/sections/overview/fset_overview.html]. Viewed
February 9, 2006.

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CRS-8
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. (Extended to September 30, 2011 by Deficit Reduction Act.20)
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
allocate another 55 MHz located below 3 GHz for auction not later than September
2002.21 These deadlines were subsequently eliminated by the Auction Reform Act.
20 P.L. 109-171, Title III, Section 3003 (b).
21 Demand for this spectrum is discussed in CRS Report RS20993, Wireless Technology and
Spectrum Demand: Advanced Wireless Services, by Linda K. Moore.

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CRS-9
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.22
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
high-speed mobile services (3G).23 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
22 See CRS Report RS22217, The Digital TV Transition: A Brief Overview, by Lennard G.
Kruger and Linda K. Moore.
23 Discussed in CRS Report RS20993, Wireless Technology and Spectrum Demand:
Advanced Wireless Services, by Linda K. Moore.

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CRS-10
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 2006.24
Budget Reconciliation. The Deficit Reduction Act of 2005 (P.L. 109-171)
covers aspects of spectrum auctions for 700 MHz. Among its provisions are:
! Set a definite date of February 17, 2009 for the release of spectrum
at 700 MHz currently held by broadcasters.
! Require auctions by the Federal Communications Commission
(FCC) of the freed spectrum to begin not later than January 28, 2008
with funds deposited not later than June 30, 2008.
! Extend the FCC’s authority to hold auctions, which currently expires
in 2007, until September 30, 2011.
! Create a fund, the Digital Television Transition and Public Safety
Fund, to receive spectrum auction proceeds and disburse designated
sums to the Treasury and for other purposes. The fund and
disbursements are to be administered by the National
Telecommunications and Information Administration (NTIA).
Effective October 1, 2006, the NTIA will be able to borrow some of the
authorized funds from the Treasury, secured by the expected proceeds of the auction
required by the bill. These funds can be used to implement transition programs for
digital television and for some public safety projects.
Spectrum Management and the 109th Congress
Several laws and policy initiatives taken in recent years could have an effect on
proposals for legislation in Congress. For example, both Congress and the
Administration have asked for studies that evaluate the role of spectrum management
in national policy and the ways in which it is put to use.
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
24 See CRS Report RS21508, Spectrum Management and Special Funds, by Linda K.
Moore.

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CRS-11
amount of spectrum at 700 MHz available for public safety and homeland security.
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 was
submitted to Congress in late 2005. In a study requested by Congress.26 To prepare
it, the FCC sought comment on whether additional spectrum should be made
available for public safety, possibly from the 700 MHz band. Comments received
from the public safety community overwhelmingly supported the need for additional
spectrum, although other bands besides 700 MHz were also mentioned. The FCC did
not make a specific recommendation for additional spectrum allocations in the short-
term although it stated that it agreed that public safety “could make use of such an
allocation in the long-term to provide broadband services.”27 It qualified this
statement by observing that spectrum is only one factor in assuring access to mobile
broadband services for emergency response.
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.28 Most of these steps are to implement
recommendations made by the Federal Government Spectrum Task Force in its
report to the President in June 2004.29 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 will form the
backbone of a National Strategic Spectrum Plan.
25 P.L. 108-458, Title VII, Subtitle E, Sec. 7502 (a).
26 P.L. 108-458, Title VII, Subtitle E, Sec. 7502 (a).
27 op. cit. FCC, Report to Congress paragraph 99.
28 “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,
2006.
29 Spectrum Policy for the 21st Century: The President’s Spectrum Policy Initiative.

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CRS-12
License Fees and Spectrum Prices. The President’s budget for FY2007
proposed that the FCC be given the authority to levy user fees on unauctioned
licensed spectrum.30 The purpose would be promote more efficient use of spectrum;
the proposal estimates that $3.6 billion would be collected over 10 years beginning
in 2007. Similar provisions were included in budget proposals for 2004, 2005, 2nd
2006. Congress, in the Commercial Spectrum Enhancement Act, required the
Comptroller General of the Government Accountability Office (GAO) to examine
“national commercial spectrum policy as implemented by the Federal
Communications Commission” and to report to Congress on its finding.31 The
study32 concluded that auctions were generally perceived as a desirable way to
allocate spectrum and recommended the extension of the FCC’s auction authority
past the current expiration date of September 30, 2007. The GAO could not find
evidence that market participants that had bought spectrum were at a disadvantage
in competing with service providers who had been assigned spectrum. It found that
the high cost of developing infrastructure was a barrier to market entry and that this
cost was more significant in shaping competition and pricing decisions than the cost
of spectrum. Many findings were inconclusive and the GAO recalled that in an
earlier study it had recommended the creation of an independent commission to
examine spectrum management.33
Other Trust Fund Proposals. 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.34 The Public Safety Interoperability Implementation Act35
would establish in the U.S. Treasury a Public Safety Communications Trust Fund36
to be funded in part with annual appropriations of $500 million for each of three
fiscal years,37 and in part with a percentage of certain spectrum auction proceeds.38
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
30 Budget of the U. S. Government, Fiscal Year 2007, pp. 299-30.
31 P.L. 108-494, Title II, Sec. 209 (a).
32 Strong Support for Extending FCC’s Auction Authority Exists, but Little Agreement on
Other Options to Improve Efficient Use of Spectrum, December 2005, GAO-06-236.
33 Comprehensive Review of U.S. Spectrum Management with Broad Stakeholder
Involvement is Needed, January 2003, GAO-03-277.
34 “Democrats Again Seek to Pump Spectrum Money into Education Technology,” by Joelle
Tessler, CQ Today - Technology & Communications, February 25, 2005.
35 For a discussion of interoperability and its role in public safety communications, see CRS
Report RL32594, Public Safety Communications Policy, by Linda K. Moore.
36 H.R. 1323, Sec. 3, “Sec. 106 “(a) “(1).
37 H.R. 1323, Sec. 3, “Sec. 106 “(f).
38 H.R. 1323, Sec. 3, “Sec. 106 “(a) “(2).

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CRS-13
members on the board.39 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.40 Preference for grants
is to be given to those proposing inter-agency or regional and multi-jurisdictional
interoperability programs.41
Small Business Loans. Legislation proposed by Congressman Bobby L.
Rush would create within the Small Business Administration a Telecommunications
Finance Office42 and a Telecommunications Spectrum Installment Loan Program43
to provide direct loans for the purchase of spectrum at auction.44 Loans guarantees
would also be provided for spectrum purchases at auction or in the secondary market
and for needed equipment.45 The Communications Act of 1934 would be amended
to allow the FCC to accept letters of credit, instead of cash, from auction participants
that are qualified telecommunications borrowers, as defined by an amended Small
Business Act.46
Rebanding Plans. The Digital Television Transition Act of 2005, which
appears as Title III, Subtitle D of the Budget Reduction Act of 2005 (H.R. 4241),
contains several provisions regarding band plans. Under Section 3411, the FCC
would be required to review the need to create different channels from those
designated in the current band plan, in order to accommodate wireless broadband
technologies in the Upper 700 MHz channels. Section 3413 (a) would require the
FCC to reevaluate the band plan for the lower 700 MHz channels (Blocks A, B and
E). Section 3413 (b) would order the FCC to revise its plan for licensing spectrum
in Block B in ways that would encourage regional and local wireless companies to
participate. A Senate bill (S. 1767, Senator Snowe) would require the FCC to create
a new band plan for Blocks A, B and E with the similar objective of favoring smaller
wireless companies.
Unlicensed Spectrum. The American Broadband for Communications Act
(S. 2332, Senator Stevens and H.R. 5085, Representative Inslee) would amend the
Communications Act to provide that certain “unused television broadcast spectrum”
could be used for unlicensed purposes, “including wireless broadband devices;” the
bill specifies that the spectrum covered are available channels in 72 - 698 MHz,
except for channels within 608 - 614 MHz. The bill also specifies the rules that the
FCC would establish to prevent interference to licensed (TV) channels. The
Wireless Innovation Act (S. 2327 Senator Allen) would require the FCC to complete
39 H.R. 1323, Sec. 3, “Sec. 106 “(b) “(1).
40 H.R. 1323, Sec. 3, “Sec. 106 “(c) “(1).
41 H.R. 1323, Sec. 3, “Sec. 106 “(c) “(2).
42 H.R. 1661, Sec. 3, “Sec. 37 (a).
43 H.R. 1661, Sec. 3, “Sec. 38 (a).
44 H.R. 1661, Sec. 3, “Sec. 38 (a) (1).
45 H.R. 1661, Sec. 3, “Sec. 39 (a).
46 H.R. 1661, Sec. 5.

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CRS-14
Docket No. 04-186 and, at a minimum, permit unlicensed use of unassigned channels
in 54 - 698 MHz and establish the rules to prevent interference between licensed and
unlicensed users.
Conclusion
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.
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.47 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.
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 many 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.
Auctioning spectrum to help close existing budget deficits is being advocated by
some as a desirable policy choice.
47 FCC 97-353, FCC Report to Congress on Spectrum Auctions, WT Docket No. 97-150,
released October 9, 1997.

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CRS-15
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).48
Figure 1. The Electromagnetic Spectrum
The relationship between frequency (f) and 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.49 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.
48 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.
49 Bandwidth is also measured in bits per second (bps) instead of cycles per second.
especially in digital systems.

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CRS-16
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., the signal is directly analogous to the source). In
digital signals, information is
Figure 2. Frequency vs. Wavelength
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

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