Spectrum Policy in the Age of Broadband:
Issues for Congress
Linda K. Moore
Specialist in Telecommunications Policy
February 3, 2010
Congressional Research Service
7-5700
www.crs.gov
R40674
CRS Report for Congress
P
repared for Members and Committees of Congress

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Spectrum Policy in the Age of Broadband: Issues for Congress

Summary
The convergence of wireless telecommunications technology and Internet protocols is fostering
new generations of mobile technologies. This transformation has created new demands for
advanced communications infrastructure and radio frequency spectrum capacity that can support
high-speed, content-rich uses. Furthermore, a number of services, in addition to consumer and
business communications, rely at least in part on wireless links to broadband backbones. Wireless
technologies support public safety communications, sensors, smart grids, medicine and public
health, intelligent transportation systems, and many other vital communications.
Existing policies for allocating and assigning spectrum rights may not be sufficient to meet the
future needs of wireless broadband. A challenge for Congress is to provide decisive policies in an
environment where there are many choices but little consensus. In formulating spectrum policy,
mainstream viewpoints generally diverge on whether to give priority to market economics or
social goals. Regarding access to spectrum, economic policy looks to harness market forces to
allocate spectrum efficiently, with spectrum license auctions as the driver. Social policy favors
ensuring wireless access to support a variety of social objectives where economic return is not
easily quantified, such as improving education, health services, and public safety. Both
approaches can stimulate economic growth and job creation.
Deciding what weight to give to specific goals and setting priorities to meet those goals pose
difficult tasks for federal administrators and regulators and for Congress. Meaningful oversight or
legislation may require making choices about what goals will best serve the public interest.
Relying on market forces to make those decisions may be the most efficient and effective way to
serve the public but, to achieve this, policy makers may need to broaden the concept of what
constitutes competition in wireless markets.
This report considers the possibility of modifying spectrum policy: (1) to support national goals
for broadband deployment by placing more emphasis on attracting new providers of wireless
broadband services; and (2) to accommodate the wireless broadband needs of industries that are
considered by many to be the economic drivers of the future, not only communications, but also
areas such as energy, health care, transportation, and education. The Federal Communications
Commission (FCC) is expected to address these and other issues in the National Broadband Plan,
a report on broadband policy mandated by Congress in the American Recovery and Reinvestment
Act of 2009 (ARRA).
Among the spectrum policy initiatives that have been proposed in Congress are: allocating more
spectrum for unlicensed use; auctioning airwaves currently allocated for federal use; and devising
new fees on spectrum use, notably those collected by the FCC’s statutory authority to implement
these measures is limited. Substantive modifications in spectrum policy would almost surely
require congressional action. The Radio Spectrum Inventory Act introduced in the Senate (S. 649,
Kerry) and the similar House-introduced Radio Spectrum Inventory Act (H.R. 3125, Waxman)
would require an inventory of existing users on prime radio frequencies, a preliminary step in
evaluating policy changes. The Spectrum Relocation and Improvement Act of 2009 (H.R. 3019,
Inslee) and the Wireless Microphone Users Interference Protection Act (H.R. 4353, Rush) would
address separate issues related to spectrum allocation.

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Spectrum Policy in the Age of Broadband: Issues for Congress

Contents
Introduction ................................................................................................................................ 1
Broadband Policy and Spectrum Needs ....................................................................................... 2
Planning for Broadband ........................................................................................................ 2
Meeting Broadband Policy Goals .......................................................................................... 3
Broadband Requires Bandwidth ............................................................................................ 3
New Policies for New Technologies ............................................................................................ 4
Shared Resources .................................................................................................................. 4
Technology ........................................................................................................................... 6
Introduction of Auctions........................................................................................................ 6
Spectrum Caps...................................................................................................................... 8
Market Concentration............................................................................................................ 9
Providers to Markets ............................................................................................................. 9
Market Competition .................................................................................................................. 10
Spectrum Auctions and Competition ................................................................................... 11
Network Access and Competition........................................................................................ 12
Issues for the 111th Congress ..................................................................................................... 14
The Hunt for More Spectrum .............................................................................................. 14
Federal Relocation .............................................................................................................. 15
Fees as a Spectrum Management Tool ................................................................................. 15
Access to Spectrum............................................................................................................. 17
Community Broadband ................................................................................................. 17
National Deployment of Free Broadband....................................................................... 18
Unlicensed Use ............................................................................................................. 18
Public Safety................................................................................................................. 19
Conclusion................................................................................................................................ 20

Tables
Table A-1. Facilities-Based Wireless Companies Ranked by U.S. Subscribers ........................... 21

Appendixes
Appendix A. Top Ten U.S. Wireless Companies by Number of Subscribers ............................... 21
Appendix B. Spectrum-Hungry Technologies ............................................................................ 22
Appendix C. Barriers to Competition in the Wireless Industry ................................................... 25
Appendix D. International Policies for Spectrum Management .................................................. 27

Contacts
Author Contact Information ...................................................................................................... 28
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Spectrum Policy in the Age of Broadband: Issues for Congress

Introduction
Wireless broadband1 can play a key role in the deployment of broadband services. Because of the
importance of wireless connectivity, radio frequency spectrum policy could be a critical factor in
national broadband policy and planning. Wireless broadband, with its rich array of services and
content, requires new spectrum capacity to accommodate growth. Spectrum capacity is necessary
to deliver mobile broadband to consumers and businesses and also to support the communications
needs of industries that use fixed wireless broadband to transmit large quantities of information
quickly and reliably.
The purpose of spectrum policy, laws, and regulation is to manage a natural resource2 for the
maximum possible benefit of the public. Although radio frequency spectrum is abundant, usable
spectrum is limited by the constraints of technology. Spectrum policy therefore entails making
decisions about how radio frequencies will be allocated and who will have access to them.3 Radio
frequency spectrum is managed by the Federal Communications Commission (FCC) for
commercial and other non-federal uses and by the National Telecommunications and Information
Administration (NTIA) for federal government use. International use is facilitated by numerous
bilateral and multilateral agreements covering many aspects of usage, including mobile
telephony.4
Current spectrum policy relies heavily on auctions to assign spectrum rights through licensing.
Economy of scale in wireless communications has become an important determinant in the
outcome of these auctions. Companies that have already made substantial investments in
infrastructure have been well placed to maximize the value of new spectrum acquisitions.
Corporate mergers and acquisitions represent another way to improve scale economies.
Efficiencies through economy of scale have contributed to creating a market for wireless services
where four companies—Verizon Wireless LLC, AT&T Inc., Sprint Nextel Corporation, and T-
Mobile USA Inc.—had approximately 90% of the customer base of subscribers at the end of
2008.5 These companies also own significant numbers of spectrum licenses covering major
markets nationwide.
The leading position of these few companies in providing a critical distribution channel—
wireless—for information and services may need to be considered in plans for national broadband
deployment. One approach to ensuring wireless access to meet national broadband goals might be

1 Broadband refers here to the capacity of the radio frequency channel. A broadband channel can quickly transmit live
video, complex graphics, and other data-rich information as well as voice and text messages, whereas a narrowband
channel might be limited to handling voice, text, and some graphics. For an in-depth study of wireless broadband, see
Connected on the Go: Broadband Goes Wireless, Wireless Broadband Access Task Force, Federal Communications
Commission, February 2005 at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-257247A1.pdf.
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).
3 Spectrum allocation and assignment is addressed in the section Spectrum Policy.
4 The International Telecommunication Union (ITU), an agency of the United Nations, is the primary organization for
coordinating global telecommunications and spectrum management.
5 Subscribers are customers who have signed up for a plan, including those with more than one plan subscription;
prepaid and pay-as-you go customers may not be included in reported totals. See Appendix A, Top Ten U.S. Wireless
Companies by Number of Subscribers.
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to tighten the regulatory structure under which wireless communications are managed. Other
approaches might seek ways to modify spectrum policies to increase market competition and to
accommodate the age of broadband.
With the introduction of auctions for spectrum licenses in 1994,6 the United States began to shift
away from assigning spectrum licenses based on regulatory decisions and toward competitive
market mechanisms. One objective of the Telecommunications Act of 1996 was to open up the
communications industry to greater competition among different sectors. One outcome of the
growth of competition was the establishment of different regulatory regimes for information
networks and for telecommunications. As a consequence of these and other legislative and
regulatory changes, the wireless industry has areas of competition, e.g. for spectrum licenses,
within a regulatory shell, such as the rules governing the Public Switched Telephone Network
(PSTN).7 As the bulk of wireless communications traffic moves from voice to data, the necessary
infrastructure is less regulated and companies will likely modify their business plans in order to
remain competitive in the new environment. The shift in infrastructure technology and regulatory
environment8 could open wireless competition to companies with business plans that are not
modeled on telecommunications industry formulae. Future providers of wireless broadband might
include any company with a robust network for carrying data and a business case for serving
broadband consumers. Potential new entrants, however, may lack access to radio frequency
spectrum, the essential resource for wireless broadband.
Broadband Policy and Spectrum Needs
In the American Recovery and Reinvestment Act of 2009 (ARRA), Congress has required the
FCC to prepare a national broadband plan, to be delivered not later than February 17, 2010 (later
extended to mid-March). The primary objective of the plan is “to ensure that all people of the
United States have access to broadband capability....” The plan is to include “an analysis of the
most effective and efficient mechanisms for ensuring broadband access....” and “a plan for use of
broadband infrastructure and services in advancing consumer welfare....”9
Planning for Broadband
As part of its preparation of a national broadband plan, as required by the ARRA, the FCC has
gathered information about the role of wireless broadband. Comments have been received about
wireless service and spectrum needs in response to the Notice of Inquiries for the National
Broadband Plan10 and on wireless innovation.11 To solicit further, focused information on

6 The Federal Communications Commission (FCC) was given the authority to conduct auctions in the Omnibus
Reconciliation Act of 1993 (P.L. 103-66).
7 PSTN is a global system; rights of access and usage in the United States are regulated by the FCC.
8 On December 1, 2009, the FCC published a public notice seeking comments on the “appropriate policy framework to
facilitate and respond to the market-led transition in technology and services, from the circuit-switched PSTN system to
an IP-based communications world.” “Comment Sought on Transition from Circuit-Switched Network to All-IP
Network,” NBP Public Notice #25, DA 09-2517 at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-09-
2517A1.pdf.
9 P.L. 111-5, Division B, Title VI, Sec. 6001 (k); 123 STAT. 515.
10 FCC, A National Broadband Plan for Our Future, Notice of Inquiry, GN Docket No. 09-51, released April 8, 2009.
See also http://www.broadband.gov/.
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spectrum allocation, the FCC has also requested comments on spectrum needs and allocation.12
The final National Broadband Plan will include a discussion of wireless broadband and spectrum
needs.13
Meeting Broadband Policy Goals
Ideally, spectrum policy should be synchronized with broadband policy. The effort to move to
energy efficiency is an example of how spectrum policy can affect other policy goals. The
installation of smart meters in homes and other buildings is a key component of Smart Grid
planning.14 Furthermore, an efficient Smart Grid requires spectrum capacity to support the
broadband communications infrastructure required to operate the grid. A Smart Grid policy that
presumes the availability of suitable spectrum for wireless connections could fall short of its
intended goal unless spectrum policy is aligned. UTC—The Utilities Telecom Council—has
published a report that argues for shared access to 30 MHz of spectrum at 1800-1830 MHz to
meet wireless communication needs.15 This band is currently allocated to federal users. Canada is
in the process of a rule-making procedure that would make the 1800-1830 MHz band available
for “electrical infrastructure;”16 operating smart grids on compatible frequencies would facilitate
cross-border management of power sources. The FCC requested comments on the
implementation of Smart Grid technology, including questions about spectrum needs and use and
its role in Smart Grid deployments.17 Reportedly, the FCC will include recommendations for
Smart Grid development as part of the National Broadband Plan. Recommendations could
include ways for utilities to share federal spectrum bands.18
Broadband Requires Bandwidth
Estimates of how much spectrum is needed for national coverage with 4G technologies vary but
several experts have estimated that 40 MHz19 is a minimum requirement per network, and 100
MHz of spectrum bandwidth might be needed for a network to meet demand for projected

(...continued)
11 FCC, Fostering Innovation and Investment in the Wireless Communications Market, Notice of Inquiry, GN Docket
No. 09-157, released August 27, 2009.
12 FCC, “Comment Sought on Spectrum for Broadband”, NBP Public Notice # 6, DA 09-2100, released September 23,
2009 at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-09-2100A1.pdf.
13 See, for example, presentation on preparation of the plan, September 29, 2009 at http://hraunfoss.fcc.gov/
edocs_public/attachmatch/DOC-293742A1.pdf.
14 The Smart Grid is a suite of initiatives to improve energy efficiency. Interactive smart meters can monitor electric
power consumption, inform consumers of steps to take to decrease consumption, and provide detailed usage reports to
utilities. See http://www.oe.energy.gov/smartgrid.htm.
15 The Utility Spectrum Crisis: A Critical Need to Enable Smart Grids, Utilities Telecom Council, January 2009 at
http://www.utc.org/utc/utility-spectrum-crisis-critical-need-enable-smart-grids.
16 Gazette Notice SMSE-008-08, June 7, 2008 at http://www.ic.gc.ca/eic/site/smt-gst.nsf/eng/sf08971.html.
17 FCC, “Comments Sought on the Implementation of Smart Grid Technology,” BNP Public Notice #2, released
September 4, 2009, at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-09-2017A1.pdf.
18 “FCC Official Says Broadband Plan To Have Smart Grid Recommendations,” by Paul Barbagallo, Daily Report for
Executives, January 25, 2010.
19 Spectrum is segmented into bands of radio frequencies and typically measured in cycles per second, or hertz.
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.
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growth.20 Among the means available to license-holders to increase their network capacity
(bandwidth) are: increasing spectral efficiency (usually by moving to a newer technology);
increasing the number of cell sites;21 and acquiring access to additional radio frequencies. Policy
tools that could be used to increase the availability of radio frequency spectrum for wireless
broadband include allocating additional spectrum, reassigning spectrum to new users, requiring
that wireless network infrastructure be shared, pooling radio frequency channels, and changing
the cost structure of spectrum access. Each of these possible solutions (and others not mentioned
here) challenges the vested interests of current beneficiaries of past spectrum policy decisions.
There is, therefore, an ongoing, vigorous debate as to how spectrum policies might be revised.
In a preliminary step to address future needs for spectrum, two bills have been introduced in the
111th Congress that would require an inventory of spectrum bands and their users.22 This
information could be used to identify unused or potentially under-used radio frequencies that
could be redirected to wireless broadband.
New Policies for New Technologies
Many factors shape spectrum policy decisions. The arrival of new technologies, societal values,
political motivations, perceptions about the importance of technologies, and business climate are
among the external forces that go into the making of spectrum policy. Policy, however, tends to
be less flexible than technology. To benefit from new broadband technologies, a restructuring of
spectrum policy and regulation may be needed to meet social and economic goals established by
the Administration and Congress.23
Shared Resources
Among the regulatory options available to the FCC to increase the utility of available spectrum
are various forms of sharing. Sharing resources is a growing trend that is viewed by regulators in
many countries as a pro-competitive way to encourage the efficient deployment of next-
generation wireless networks.24 Requiring wholesale access to a network obliges the network
owner to negotiate sharing agreements with third-party providers. Network sharing can also occur
through co-ownership or co-operative agreements. Spectrum licenses can be shared by contract or

20 The amount of capacity (MHz) needed is primarily a function of the size of the area covered, the type of traffic, the
number of users, the technology used, and the desired levels of speed and reliability. At an FCC workshop on spectrum,
September 17, 2009, 100 MHz was frequently cited as the likely increase needed for mobile broadband networks in
five years time, http://www.broadband.gov/ws_spectrum.
21 A cell site is the antenna and communications equipment placed on a tower or other structure to serve a small
geographical area, or cell. Each cell provides capacity to serve expected demand. Within limits, increased demand can
be met by increasing the number of cell sites.
22 Radio Spectrum Inventory Act (S. 649) and Radio Spectrum Inventory Act (H.R. 3125).
23 The question as to whether “regulatory models” have kept up with changes in the wireless industry was raised in the
opening statement of Senator John D. Rockefeller, IV at a hearing on “The Wireless Consumer Experience,” Senate
Committee on Commerce, Science, and Transportation, June 17, 2009. On a global level, the International
Telecommunications Union (ITU) is considering how policies and regulations may need to be changed in response to
new technologies. A World Telecommunication Policy Forum in April 2009, organized by the ITU, addressed these
and other topics. See http://www.itu.int/osg/csd/wtpf/wtpf2009/about.html.
24 Trends in Telecommunication Reform 2008: Six Degrees of Sharing, International Telecommunications Union,
November 2008. Report available at http://www.ifap.ru/library/book385.pdf.
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regulatory requirement. The NTIA has recommended exploring “ways to create incentives for
more efficient use of limited spectrum resources, such as dynamic or opportunistic frequency
sharing arrangements in both licensed and unlicensed uses.”25 This suggestion was incorporated
into the 2011 Budget prepared by the Office of Management and Budget. The budget document
directs the NTIA to collaborate with the FCC “to develop a plan to make available significant
spectrum suitable for both mobile and fixed wireless broadband use over the next ten years. The
plan will focus on making spectrum available for exclusive use by commercial broadband
providers or technologies, or for dynamic, shared access by commercial and government users.”26
The primary difficulty for regulators in overseeing the sharing of spectrum is to minimize
interference among devices operating on the same or nearby frequencies. It was primarily to
prevent interference to wireless messages that spectrum licensing was first instituted. Today, a
number of administrative and technological methods are available to minimize interference of
wireless transmissions. In theory, all spectrum bands can be shared if interference can be
managed. Among the technologies that facilitate spectrum sharing are cognitive radio and
Dynamic Spectrum Access, also referred to as XG networks.27 These enabling technologies allow
communications to switch instantly among network frequencies that are not in use and therefore
available to any radio device equipped with cognitive technology.
Among the methods of sharing wireless connectivity currently practiced in the United States are
sharing network facilities, sharing network operations, and sharing spectrum. Examples of
sharing include nationwide roaming,28 selling packages of minutes purchased from a facilities-
based network, leasing network capacity and spectrum access from a facilities-based network to
create a new service provider—known as a Virtual Mobile Network Operator29—and spectrum
sharing. In general, access is leased from an owner—of a tower, a network, or a spectrum license.
Another option is to allocate spectrum for unlicensed use; any device authorized by the FCC may
operate on the designated frequencies.
With the growing cost of building out network capacity to accommodate mobile broadband, some
wireless carriers—notably in the European Union—are entering into cooperative agreements to
jointly own and build networks; in this situation each carrier operates on its own frequencies. A
regulatory challenge in overseeing co-operative networks is to ensure a level of transparency of
operations to prevent collusion or other anti-competitive behavior.

25 Letter to the FCC, Re: National Broadband Plan, GN Doc. No. 09-51, January 4, 2010 at http://www.ntia.doc.gov/
filings/2009/FCCLetter_Docket09-51_20100104.pdf.
26 Office of Management and Budget, Budget of the U.S. Government, Fiscal Year 2011, Appendix, ”Other Independent
Agencies,” p. 1263. See also, FCC, Fiscal Year 2011 Budget Estimates Submitted to Congress, February 2010 at
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-296111A1.pdf.
27 The neXt Generation program, or XG, is a technology development project sponsored by the Strategic Technology
Office of the Defense Advanced Research Projects Agency (DARPA). The main goals of the program include
developing both the enabling technologies and system concepts that dynamically redistribute allocated spectrum.
28 The practice of transferring a wireless call from one network to another—or roaming—is described in Understanding
Wireless Telephone Coverage Areas, FCC Consumer Facts at http://www.ifap.ru/library/book385.pdf.
29 See Appendix A, Top Ten U.S. Wireless Companies by Number of Subscribers.
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Technology
Mobile communications became generally available to businesses and consumers in the 1980s.
The pioneering cell phone technologies were analog.30 Second-generation (2G) wireless devices
were characterized by digitized delivery systems. Third-generation (3G) wireless technology
represents significant advances in the ability to deliver data and images. The first commercial
release of 3G was in Japan in 2001; the technology successfully debuted in the United States in
2003. 3G technologies can support multi-function devices, such as the BlackBerry and the
iPhone. Successor technologies, often referred to as 4G, are expected to support broadband speeds
that will rival wireline connections such as fiber optic cable, with the advantage of complete
mobility. 4G wireless broadband technologies include WiMAX31 and Long Term Evolution (LTE)
networks. Both are based on TCP/IP, the core protocol of the Internet.
Wireless technologies that will facilitate broadband deployment and for which spectrum may
need to be allocated include 4G networks; fixed wireless as an alternative to fiber optic cable;
broadband on unlicensed frequencies (such as Wi-Fi); high performance mobile devices such as
smartphones and netbooks; and cloud computing.32
Introduction of Auctions
The FCC, acting on the statutory authority given to it by Congress, has broad regulatory powers
for spectrum management. The FCC was created as part of the Communications Act of 193433 as
the successor to the Federal Radio Commission, which was formed under the Radio Act of
1927.34 The first statute covering the regulation of airwaves in the United States was the Radio
Act of 1912, which gave the authority to assign usage rights (licenses) to the Secretary of the
Department of Commerce and Labor.35 Licensing was necessary in part because, as radio
communications grew, it became crucial that frequencies be reserved for specific uses or users, to
minimize interference among wireless transmissions.36
A key component of spectrum policy is the allocation of bands of frequencies for specific uses
and the assignment of licenses within those bands. Allocation refers to the decisions, sometimes
reached at the international level, that set aside bands of frequencies for categories of uses or
users; assignment refers to the transfer of spectrum rights to specific license-holders. Radio
frequency spectrum is treated as a natural resource that belongs to the American people. The
FCC, therefore, licenses spectrum but does not convey ownership. Before auctions became the

30 A wireless analog signal uses a continuous transmission form. Digital signals are discontinuous (discrete)
transmissions.
31 WiMAX stands for Worldwide Interoperability for Microwave Access.
32 Key technologies for mobile broadband are summarized in Appendix B, Spectrum-Hungry Technologies.
33 47 U.S.C. § 151.
34 P.L. 632, Sec. 3.
35 P.L. 264, “License.”
36 The Radio Act of 1912 was passed partly in response to radio problems—including interference—associated with the
sinking of the Titanic. Hearings Before a Subcommittee of the Committee on Commerce, 62nd Congress, 2nd Session,
pursuant to S. Res. 283, “Directing the Committee on Commerce to Investigate the Cause Leading to the Wreck of the
White Star Liner ‘Titanic,’” testimony of Guglielmo Marconi, et al.
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primary method for assigning spectrum licenses the FCC used a number of different approaches,
primarily based on perceived merit, to select license-holders.
Auctions are regarded as a market-based mechanism for assigning spectrum. The FCC was
authorized to organize auctions to award spectrum licenses for certain wireless communications
services in the Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66). The act amended the
Communications Act of 1934 with a number of important provisions affecting the availability of
spectrum. The Licensing Improvement section37 of the act laid out the general requirements for
the FCC to establish a competitive bidding methodology and consider, in the process, objectives
such as the development and rapid deployment of new technologies.38 The law prohibited the
FCC from making spectrum allocation decisions based “solely or predominately on the
expectation of Federal revenues.... ”39 The Emerging Telecommunications Technologies section40
directed the NTIA to identify not less than 200 MHz of radio frequencies used by the federal
government that could be transferred to the commercial sector through auctions.41 The FCC was
directed to allocate and assign these released frequencies over a period of at least ten years, and to
reserve a significant portion of the frequencies for allocation after the ten-year time span.42
Similar to the requirements for competitive bidding, the FCC was instructed to ensure the
availability of frequencies for new technologies and services, and also the availability of
frequencies to stimulate the development of wireless technologies.43 The FCC was further
required to address “the feasibility of reallocating portions of the spectrum from current
commercial and other non-federal uses to provide for more efficient use of spectrum” and for
“innovation and marketplace developments that may affect the relative efficiencies of different
spectrum allocations.”44 Over time, auction rules have been modified in accordance with the
changing policy goals of the FCC and Congress but subsequent amendments to the
Communications Act of 1934 have not substantively changed the above-noted provisions
regarding spectrum allocation.45
Following passage of the Omnibus Budget Reconciliation Act of 1993, subsequent laws that dealt
with spectrum policy and auctions included the Balanced Budget Act of 1997 (P.L. 105-33), the
Auction Reform Act of 2002 (P.L. 107-195), the Commercial Spectrum Enhancement Act of 2004
(P.L. 108-494, Title II), and the Deficit Reduction Act of 2005 (P.L. 109-171). The Balanced
Budget Act of 1997 contained several spectrum management provisions. For example, whereas
previous statutes gave the FCC the authority to conduct auctions, the act required the FCC to use
auctions to award ownership for most types of spectrum licenses.46 The act also gave the FCC
auction authority until September 30, 2007 (extended to September 30, 2011, by Deficit
Reduction Act of 200547). Furthermore, the act directed the FCC to allocate spectrum for “flexible

37 P.L. 103-66 Title III, Subtitle C, Chapter 1.
38 47 U.S.C. § 309 (j), especially (1), (3), and (4).
39 47 U.S.C. § 309 (j) (7) (A).
40 P.L. 103-66 Title III, Subtitle C, Chapter 2.
41 47 U.S.C. § 923 (b) (1).
42 47 U.S.C. § 925 (b) (1).
43 47 U.S.C. § 925 (b) (2).
44 47 U.S.C. § 925 (b) (3).
45 See United States Code Annotated, Title 47, sections as footnoted, WEST Group, 2001 and the 2007 Cumulative
Annual Pocket Part.
46 47 U.S.C. § 309 (j) (1).
47 P.L. 109-171, Title III, Section 3003 (b).
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use,” which means defining new services broadly so that services can change as
telecommunications technology evolves.
Spectrum Caps
As part of its preparations for the first spectrum license auctions, the FCC decided to set caps on
the amount of spectrum any one company could control in any geographically designated
market.48 The theory behind spectrum capping is that each license has an economic value and a
foreclosure value. The economic value is derived from the return on investment in spectrum
licenses and network infrastructure. The foreclosure value is the value to a wireless company that
already has substantial market share and wants to keep its dominant position by precluding
competition. Spectrum caps were chosen as the method to prevent foreclosure bidding. The intent
was to ensure multiple competitors in each market and to restrict bidding to only the licenses that
could be used in the near term.
Beginning in 2001, spectrum policy placed increased emphasis on promoting spectrum and
market efficiency through consolidation. The FCC ruled to end spectrum caps, citing greater
spectral efficiency from larger networks as one benefit of the ruling. Spectrum caps were seen as
barriers to mergers within the wireless industry, to the growth of existing wireless companies, and
to the benefits of scale economies. The spectrum caps were eliminated on January 1, 2003.49
Auction rules requiring the timely build-out of networks became a key policy tool to deter
hoarding. The FCC instituted a policy for evaluating spectrum holdings on a market-by-market,
case-by-case basis—a practice referred to as spectrum screening—as a measure of
competitiveness.
In 2008, the Rural Telecommunications Group, Inc. (RTG) petitioned the FCC to impose a
spectrum cap of 110 MHz for holdings below 2.3 GHz. In October 2008, the FCC sought
comments on the RTG petition for rulemaking.50 RTG argued that competition in the industry was
declining as it became more concentrated. It claimed that the larger carriers were warehousing
their spectrum holdings in rural areas while rural carriers were struggling to acquire spectrum
capacity for mobile broadband and expansion. Rural carriers, RTG reported, were being shut out
of opportunities to acquire new spectrum holdings and were being outbid in spectrum auctions.51
Opponents to the spectrum cap cited data to support their claims that the wireless
communications market is competitive. They argued that additional amounts of spectrum are
needed to support the growth in mobile broadband and that a spectrum cap could cut off growth
and innovation.52 Implementing spectrum caps as a tool for regulating competition would
represent a significant shift in policy for the FCC, were it to take that course.

48 Licenses are designated for a specific geographic area, such as rural areas, metropolitan areas, regions, or the entire
nation.
49 FCC News, “FCC Announces Wireless Spectrum Cap to Sunset Effective January 1, 2003,” November 8, 2001.
Report and Order FCC-01-328. See Docket No. 01-14, Notice of Proposed Rulemaking, released January 23, 2001 at
http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-01-28A1.pdf.
50 FCC RM No. 11498, October 10, 2008. Comments supporting and opposing the petition are published in this
proceeding.
51 Those supporting the RTG petition included the Organization for the Promotion and Advancement of Small
Telecommunications Companies (OPASTCO), the National Telecommunications Cooperative Association, the Public
Interest Spectrum Coalition, and a number of smaller (non-dominant) wireless carriers.
52 Opponents to spectrum caps that filed comments were AT&T Inc., Verizon Wireless, CTIA – The Wireless
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In comments filed regarding the National Broadband Plan, the Department of Justice considered
the possibility that “the foreclosure value for incumbents in a given locale could be very high.”53
Although it recognized some form of spectrum caps as an option for assuring new market
entrants, it observed that “there are substantial advantages to deploying newly available spectrum
in order to enable additional providers to mount stronger challenges to broadband incumbents.”54
Market Concentration
Policies that have encouraged economies of scale have favored mergers and acquisitions of
wireless companies. There are now four facilities-based55 wireless companies in the United States
that the FCC describes as nationwide: AT&T, Verizon Wireless, Sprint Nextel, and T-Mobile. 56 A
combination of policy and market forces has divided the commercial wireless market into sharply
different tiers.57 The top-ranked provider, Verizon Wireless, ended 2008 with 83,700,000
subscribers. T-Mobile, the fourth largest company, reported 32,100,000 customers in 2008; the
fifth ranked company, U.S. Cellular, had 6,200,000 customers with service contracts. Number ten
on the list had 407,000 subscribers. Several hundred smaller carriers serve niche markets.
The FCC recognizes that the promotion of economy of scale favors market concentration, but
concludes that “U.S. consumers continue to benefit from effective competition” in the
commercial wireless marketplace, citing such factors as usage, pricing, the number of providers
in individual markets, and improvements in quality of service, among other factors.58
Providers to Markets
In measuring the number of service providers in a market, the FCC uses U.S. Census Data to
identify the percentage of the population served by one or more providers, based on census block
population figures. The most recent data, for example, indicates that 8,052,071 census blocks
representing 284,153,539 inhabitants, 99.6% of the U.S. population, had at least one wireless
service provider.59 Based on providers to census blocks, 90.5% of the population lived in an area
served by four or more companies, diminishing to 24.6% for six or more providers and 4.4% for
seven or more. Some of the smaller companies included in the count of competitive providers
may be able to stay in business because of subsidies and other policies for rural and underserved
areas. Companies that benefit from special considerations might be able to serve a market, as
measured by the FCC, but may not be influencing prices or stimulating innovation, two benefits
of competition that are discussed in the following section.

(...continued)
Association, the Telecommunications Industry Association, and the Wireless Communications Association
International.
53 Ex Parte Submission of the United States Department of Justice, In the matter of Economic Issues in Broadband
Competition: A National Broadband Plan for Our Future, GN Docket 09-51, January 4, 2010, p. 23, at
http://fjallfoss.fcc.gov/ecfs/document/view?id=7020355122.
54 Ibid., p. 24.
55 Facilities-based mobile telephone operators own and operate their network facilities.
56 Thirteenth Report, paragraph 14.
57 See Appendix A, Top Ten U.S. Wireless Companies by Number of Subscribers.
58Thirteenth Report, paragraph 274.
59 Ibid., p. 6.
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Over the years, various legislative and policy initiatives have created a number of requirements to
help small and rural carriers acquire spectrum licenses.60 Some of the FCC’s efforts to encourage
spectrum license ownership for small, rural, or entrepreneurial businesses are in response to
Congressional mandates.61 These and other statutory and regulatory programs may have allowed
many small carriers to remain in business even though many others have been absorbed by larger
carriers.62 As wireless traffic, revenue, and profits migrate to broadband, business models that
were effective for voice traffic may no longer be viable, especially for companies that have relied
on the regulatory environment to protect their markets. This change in operating environment
may have disproportionately affected the ability of rural wireless carriers, in particular, to
compete effectively.63 A study of how new technologies might be affecting the competitiveness of
small and rural carriers might be useful in reviewing the effectiveness of policies intended to aid
them.64
Wireless companies also compete as providers in global markets. Although international traffic
may be a small part of wireless voice communications, competition in providing services is
global.65 AT&T, Verizon, and T-Mobile are major players internationally as well as in the United
States.66 Corporate decisions such as the introduction of new technologies and services are made
for both the United States and international markets. Actions taken for domestic markets may
influence decisions made to enhance global competition and vice versa. Therefore, policies for
assigning spectrum assets might incorporate U.S. goals for global competiveness.
Market Competition
There are many ways to view competition. Although competitiveness may be evaluated by factors
such as barriers to entry67 or number of market participants, a key measure of whether market
competition is working is an assessment of the dynamic of a specific market: its prices, variety,
level of service, and other indicators that are considered hallmarks of competitive behavior. The
Federal Trade Commission, for example, promotes competition as “the best way to reduce costs,

60 For example, most auctions have provided bidding credits for small businesses.
61 In 47 USC § 309 (j) (3) (B), the FCC is instructed to promote “economic opportunity and competition and ensuring
that new and innovative technologies are readily available to the American people by avoiding excessive concentration
of licenses and by disseminating licenses among a wide variety of applicants.... ”
62 The Congressional Budget Office (CBO) reported in a 2005 study that a significant number of small companies that
acquired spectrum licenses through preferential programs later transferred the licenses to larger companies: Small
Businesses in License Auctions for Wireless Personal Communications Services, A CBO Paper, October 2005, at
http://www.cbo.gov/ftpdocs/68xx/doc6808/10-24-FCC.pdf.
63 A number of rural wireless carriers and their associations have filed comments on the increasing difficulties they face
in competing for wireless customers. Comments are in a number of FCC dockets, such as RM11498, regarding
spectrum caps, and WT Docket No. 09-66, on the state of wireless competition.
64 The CBO study cited above was prepared at the request of the Senate Budget Committee to examine the impact of
small-bidder preferences on federal revenue and was completed before data traffic became a significant factor in
providing wireless services.
65 The international framework for spectrum management and wireless competition is summarized in Appendix D,
International Policies for Spectrum Management.
66 Verizon Wireless is 45% owned by the British Telecommunications giant Vodafone, PLC. T-Mobile is 100% owned
by Deutsche Telecom.
67 Barriers to entry in the wireless market are discussed in Appendix C, Barriers to Competition in the Wireless
Industry.
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encourage innovation, and expand choices for consumers.”68 Viewpoints about the level of
competitiveness in providing wireless services to the U.S. market differ.69 However,
telecommunications business analysts generally describe the U.S. market for wireless services as
competitive because consumers benefit in many ways from competition on price, service,
coverage, and the availability of new devices.
Congress provided guidelines for measuring wireless competition in the Omnibus Budget
Reconciliation Act of 1993. It directed the FCC to provide an annual report to Congress on
competition that would examine the number of competitors offering various services, assess the
effectiveness of competition, evaluate whether any competitors have a dominant share of the
market for such services, and prepare a statement about whether additional providers might
enhance competition.70 In interpreting these Congressional guidelines, the FCC has over the years
placed the greatest emphasis on measuring competition in Commercial Mobile Radio Services
(CMRS) through the examination of these factors: market structure; provider conduct; consumer
behavior; and market performance.71
Both the wireless industry and its regulator have focused on “wireless consumer welfare”72 in
evaluating competition and the effectiveness of spectrum policies for assigning spectrum licenses.
Auctions are judged to be an efficient way of assigning spectrum for commercial uses that adhere
to traditional business plans.73
Spectrum Auctions and Competition
Auction winners are deemed to be the companies that can maximize the value of the spectrum to
society by maximizing its value as a corporate asset. However, auction-centric spectrum policies
appear to have generally focused on assigning licenses to commercial competitors in traditional
markets that serve consumers and businesses. Auctioning spectrum licenses may direct assets to
end-use customers instead of providing wireless services where the consumer may be the
beneficiary but not the customer. The role of wireless communications to support a smart grid has
been briefly noted in this report. Spectrum resources are also needed for railroad safety,74 for
water conservation,75 for the safe maintenance of critical infrastructure industries,76 and for many

68 “Competition in the Technology Marketplace” at http://www.ftc.gov/bc/tech/index.htm.
69Different assessments of competition in the wireless market have been filed as comments in FCC Docket No. 09-66,
part of the process for the preparation of the FCC’s Fourteenth Report; annual report and analysis of competitive
market conditions with respect to commercial mobile services.
70 47 U.S.C. § 332 (c) (1) (C). The most recent report is Thirteenth Report; annual report and analysis of competitive
market conditions with respect to commercial mobile services, FCC, DA 09-54, released January 16, 2009.
71Thirteenth Report, paragraph 5.
72 This phrase is used in the written statement of AT&T Inc. submitted for a hearing before the House of
Representatives, Committee on Energy and Commerce, Subcommittee on Communications, Technology, and the
Internet, “An Examination of Competition in the Wireless Industry,” May 7, 2009. In written testimony submitted by
Verizon Wireless for the same hearing, comments stated that wireless providers need suitable and sufficient spectrum
because of “consumers’ reliance on broadband services.”
73The GAO has reported this viewpoint in several reports, including Telecommunications: Strong Support for
Extending FCC’s Auction Authority Exists, but Little Agreement on Other Options to Improve Efficient Use of
Spectrum,” December 20, 2005, GAO-06-236 and Telecommunications: Options for and Barriers to Spectrum Reform,
March 14, 2006, GAO-06-526T.
74 The railroad industry uses wireless communications as part of their information networks to monitor activity.
75 For example, sensors buried at the level of plant roots recognize when watering is needed and communicate this
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other applications that may not have an immediate commercial value but can provide long-lasting
value to society as a whole.
In its Thirteenth Report on competition, the FCC ratified its auction policies by citing the success
of several new entrants in acquiring spectrum licenses at auction. It concluded that these
successes demonstrated that spectrum allocation and assignment policies do not “create an
effective barrier to entry.... ”77 A different FCC study of market conditions,78 however, questioned
whether the comment process on proposed spectrum license auction and service rules might
incorporate industry biases by relying on “the reported needs of interested parties,”79 described in
the study as companies with large holdings of spectrum licenses. The study suggests that large
wireless companies with significant holdings of spectrum licenses and investment in
infrastructure—the wireless incumbents—are disproportionately influencing the structure of
auctions.
The rules set by the FCC for using spectrum licenses (service rules) may have been oriented
toward the concepts of building and managing networks that were formed in the days of the
telephone, favoring traditional telecommunications business plans over those of companies with
different business models. Some companies that might be well suited to meet social goals, such as
access in rural areas, might have been precluded from bidding at all because of constraints not
considered relevant to market-driven allocations. For example, public utilities, municipal co-
operatives, commuter railroads, and other public or quasi-public entities face a variety of legal,
regulatory, and structural constraints that limit or prohibit their ability to participate in an auction
or buy spectrum licenses. Many of these constraints exist at the state level but federal spectrum
policy plays a role in perpetuating the status quo.
Network Access and Competition
The belief that a competitive environment for providing wireless services is best served through
spectrum auctions is widely supported by the leaders of the cell phone industry such as Verizon
Wireless, AT&T Inc., and the industry association CTIA—The Wireless Association.80 From the
perspective of the information technology industry, however, there is concern that existing
distribution channels for wireless are hampering the introduction of innovative wireless services
and devices that might be marketed directly to consumers.

(...continued)
information over wireless networks.
76 In general, critical infrastructure industries facilitate the production of critical goods and services such as safe
drinking water, fuel, telecommunications, financial services, and emergency response. A discussion of key issues
appears in CRS Report RL30153, Critical Infrastructures: Background, Policy, and Implementation, by John D.
Moteff.
77 Thirteenth Report, paragraph 68.
78 OSP Working Paper Series # 43, A Market-based Approach to Establishing Licensing Rules: Licensed Versus
Unlicensed Use of Spectrum, FCC, Office of Strategic Planning and Policy Analysis, February 2008. At
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-280523A1.pdf.
79 Ibid., p. 1.
80 For example, CTIA Ex Parte filing with the FCC, January 8, 2008, Docket No. 07-71 at http://files.ctia.org/pdf/
080108_US-OECD_10_Comparison_Ex_Parte.pdf.
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Although a number of computer and Internet equipment manufacturers are planning to enter the
smartphone market with the intention of bringing their skills to the convergence of mobile and
Internet technologies,81economic success of these products depends in part on access to radio
frequencies that cover key markets nationwide.82 Even long-established manufacturers of wireless
devices, such as Motorola, Inc., are dependent on the major wireless companies for the success of
their products, as these companies determine which devices reach their customers.83 The New
York Times has reported that sales of 100,000 units is considered the threshold for the market
success of a wireless device.84 Using this threshold as a guideline, wireless channels must be able
to reach enough customers so that at least 100,000 of them will buy a new wireless device. The
need for a device manufacturer to partner with a large provider of wireless services could be
viewed as a barrier to entry or as the means to achieve needed economies of scale.
In the 2008 auction of spectrum licenses at 700 MHz,85 several companies associated with Silicon
Valley and Internet ventures petitioned the FCC to set aside a block of spectrum as a national
license with a requirement that the network be available—open—to all. Open access was defined
as open devices, open applications, open services, and open networks.86 The position put forward
by these companies was that access of unlicensed airwaves was not enough to stimulate
innovation and competition for new devices, services, and applications. They argued that
innovators, especially start-up companies, were often closed out of markets unless they could
convince a wireless network operator to accept and market their inventions.87 The FCC
subsequently ruled to auction licenses for 22 MHz of spectrum (designated as the C Block) with
service rules requiring the first two criteria: open devices and open applications. The winning
bidders, most notably Verizon Wireless,88 are required to allow their customers to choose their
own handsets and download programs of their choice, subject to reasonable conditions needed to
protect the network from harm.
Proponents of open access argue that only an open network that anyone can use—not just
subscribers of one wireless company—can provide consumer choice. From this perspective, a
wholesale network could provide more market opportunities for new wireless devices, especially
wireless devices that could provide unrestricted access to the Internet. A wholesale network
would allow customers to choose their own wireless devices without necessarily committing to a
service plan from a single provider. The network owner would operate along the same principles
used for shopping malls, providing the infrastructure for others to retail their own products and
services.

81 “Computer Makers Prepare to Stake Bigger Claim in Phones,” by Ashlee Vance, The New York Times, March 16,
2009.
82 See, for example, “A Dell Smartphone Would Face Big Hurdles,” by Olga Kharif, BusinessWeek, March 25, 2009.
83“Motorola Scrambles to Restore Its Lost Cellphone Glory,” by Matt Richtel, The New York Times, May 1, 2009.
84 “Summer’s Pocket-Size Blockbusters,” by Matt Richtel, New York Times, May 18, 2009.
85 For information, see Auction 73 at http://wireless.fcc.gov/auctions/default.htm?job=auction_summary&id=73.
86 FCC filings, WT Docket No. 96-86, by Frontline Wireless, LCC, Google, Inc., the 4G Coalition, and the Public
Interest Spectrum Coalition.
87 Comments, for example, made by Ram Shriram and Vanu Bose at the Frontline Town Hall, July 12, 2007,
Washington, DC, and by Jason Devitt at a panel discussion during the State of the Net conference, January 30, 2008,
Washington, DC.
88 Of the 10 licenses of the C Block, seven were auctioned to Verizon Wireless: all six licenses covering the continental
United States and a seventh license for Hawaii. Licenses providing coverage for Alaska, Puerto Rico, and the Gulf of
Mexico were won by other bidders. See “FCC 700 MHz Band Auction, Auction ID:73, Winning Bids,” attachment A,
p. 63, at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-08-595A2.pdf.
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The FCC was also petitioned to designate spectrum licenses at 700 MHz for networks that would
operate on a wholesale business model. It was argued that the wholesale business model would be
the most viable for a small business new entrant and that the auction rules and conditions adopted
by the FCC were prejudicial to small business.89 Wireless incumbents, in particular, have
challenged the concepts of open access and wholesaling. They have claimed that the unproven
nature of a wholesale business model makes it risky and that therefore the auction value of
licenses with a wholesaling requirement would be diminished. They have argued that imposing
requirements that would create a wholesale network introduces an extra level of regulatory
oversight, covering such areas as handset compatibility, applications standards, market access
regulation, and interconnection rules.90
Issues for the 111th Congress
As the nation works toward development of a national broadband policy, Congress has indicated
an interest in some aspects of related spectrum policies. As more information about broadband
deployment and needs becomes available, Congress could choose to review existing policies,
regulations, and legislation regarding spectrum management
Several hearings have considered some aspects of wireless competition and spectrum policy. A
subcommittee of the House Committee on Energy and Commerce explored a range of regulatory
and other issues in a hearing on wireless competition on May 7, 2009.91 Topics discussed at the
hearing included rules governing cellular tower siting and zoning, the need for improving
regulations for consumer protection at the state and federal level, the regulatory framework that
governs wireless providers’ access to high capacity infrastructure (special access), and the
availability of spectrum. Wireless competition was also the main focus of two Senate hearings in
June. The Senate Committee on the Judiciary, Subcommittee on Antitrust, Competition Policy
and Consumer Rights held a hearing on “Cell Phone Text Messaging Rate Increases and the State
of Competition in the Wireless Market,” on June 16, 2009. The subcommittee focused on reports
of significant increases in the price of sending text messages and how this might be an indicator
of declining competitiveness but also considered other possible barriers to competition, such as
market concentration, roaming fees, difficulties in obtaining spectrum, and handset exclusivity
agreements. Handset exclusivity, and its roll in fostering or hindering competition and innovation,
was the main topic of a hearing on “The Consumer Wireless Experience,” held on June 17, 2009,
by the Senate Committee on Commerce, Science, and Transportation. Access to wireless
broadband in rural areas and the apparent failure of market competition to meet rural demand for
services was also discussed as was the impact of spectrum policy on competition.
The Hunt for More Spectrum
Similar versions of a Radio Spectrum Inventory Act (S. 649, Senator Kerry and H.R. 3125,
Representative Waxman) would require the FCC and NTIA to prepare an inventory of spectrum
allocations and assignments in prime radio frequency bands. The Senate bill specifies a range

89 Petition for Reconsideration of Frontline Wireless, LLC, WT Docket No. 96-86.
90 FCC filings, WT Docket No. 96-86, by CTIA-The Wireless Association, AT&T, and others.
91 House of Representatives, Committee on Energy and Commerce, Subcommittee on Communications, Technology,
and the Internet, “An Examination of Competition in the Wireless Industry,” May 7, 2009.
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from 300 MHz to 3.5 GHz, although an amendment added when the bill was voted out of
committee would give the agencies discretion to expand the range.92 The House bill specifies that
the inventory cover frequencies from 225 MHz to 10 GHz. The information from the detailed
report on users and uses would help policy makers evaluate whether spectrum is being allocated
and used effectively.93 The bills would require an accounting of spectrum allocation in the
designated bands that would identify commercial license-holders, government agency spectrum
allocations, and the number of devices deployed in those bands. If available, information would
be provided on the types of wireless devices used on licensed frequencies and on unlicensed
frequencies within each band. Contour maps and information on the location of base stations and
other fixed transmitters might also be included in the inventory. The inventory results would be
available over the Internet. Exemptions from public access to some information may be granted
for reasons of national security, although the two bills vary on terms for these exemptions. The
inventory is to be completed and submitted in reports to Congress within 180 days of passage into
law.94 The House version also would require the agencies to submit an update report to Congress
annually that would identify the least used blocks of spectrum in the inventory and possibly
recommend spectrum reallocation to a different use.
Federal Relocation
The Spectrum Relocation and Improvement Act of 2009 (H.R. 3019, Representative Inslee)
would address issues arising from current experiences in relocating federal users to clear space
for commercial license-holders. The bill would define the rights and responsibilities of federal
entities in the spectrum relocation process, especially obligations for sharing, and their eligibility
for payments from the Spectrum Relocation Fund. The Spectrum Relocation Fund was created by
the Commercial Spectrum Enhancement Act, Title II (P.L. 108-494), in 2004, to provide a
mechanism whereby federal agencies could recover the costs of moving from one spectrum band
to another. The fund is administered by the Office of Management and Budget. Following
procedures required by the act, the FCC scheduled an auction of designated federal frequencies
for commercial use as Advanced Wireless Services (AWS). The AWS auction was completed on
September 18, 2006, attracting nearly $13.9 billion in completed bids.95 The FCC ruled that
auction winners wishing to put acquired licenses to immediate use would in most cases be able to
share with current federal users under guidance from the FCC.96
Fees as a Spectrum Management Tool
The Obama Administration has proposed that the FCC be given the authority to levy fees, and to
use other economic mechanisms, as a spectrum management tool.97 The 2011 fiscal year budget

92 Senate Committee on Commerce, Science, and Transportation, Mark Up, July 8, 2009.
93 “Kerry, Snow Call for Inventory of Airwaves,” Newsroom, Office of Senator John F. Kerry, March 19, 2009.
94 The status of the bills can be monitored through the Legislative Information System (LIS) at
http://www.congress.gov.
95 “FCC’s Advanced Wireless Services (AWS) Spectrum Auction Concludes,” FCC News, September 18, 2006.
96 “Coordination Procedures in the 1710-1755 MHz Band,” FCC Public Notice, FCC 06-50, April 20, 2006 (WTB
Docket No. 02-353).
97 Office of Management and Budget, Budget of the U.S. Government, Fiscal Year 2011, Appendix, ”Other Independent
Agencies,” p. 1263. Office of Management and Budget, Budget of the U.S. Government, Fiscal Year 2011, Appendix,
”Other Independent Agencies,” p. 1263. See also, FCC, Fiscal Year 2011 Budget Estimates Submitted to Congress,
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prepared by the Office of Management and Budget projects new revenue from spectrum license
user fees of $4.775 billion for fiscal years 2011 through 2020.98 Similar projections were made in
the 2010 budget99 and in budget proposals during the administration of President George W.
Bush.100
Although Congress never took up legislation in response to the Bush Administration proposals,
the 108th Congress instructed the GAO to take note of the possible impact of changing the
spectrum license fee structure. In the Commercial Spectrum Enhancement Act (P.L. 108-494,
Title II) the GAO was instructed to examine “national commercial spectrum policy as
implemented by the Federal Communications Commission” and report on its findings in 2005.101
The GAO was to examine the impact of auctioning licenses on the economic climate for
broadcast and wireless technologies and 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 purchased spectrum through the auction process. The GAO
was also to evaluate whether the disparate methods of allocating spectrum had an adverse impact
on the introduction of new services. The conclusions of the study were to be reviewed in the
context of an Administration proposal to introduce license user fees on licenses that had not been
auctioned. The GAO was also to provide an evaluation for Congress regarding the impact of
assessing license fees on the competitive climate in the wireless and broadcast industries.
After consultation with the committees of jurisdiction, the GAO did not include an analysis of
license fees in its report. Instead it focused on the impact of auctions on factors such as end-user
prices, investment in infrastructure, and competition. One of the report’s conclusions was that the
cost of purchasing licenses did not affect price and competition in the long run because the cost
was a one-time, sunk cost.102 New licensing regimes were mentioned in the report as a possible
means of increasing spectral efficiency but the suggestion received no discussion in the report.103
The FCC’s statutory authority to impose new spectrum user fees is limited. The FCC was
authorized by Congress to set license application fees104 and regulatory fees to recover costs.105 A
new fee structure seeking recovery beyond costs would require Congressional authorization,
either through an appropriations bill or new legislation. New fees could be difficult to devise as
many of the licenses originally assigned at little cost to the acquirer were subsequently sold to
other carriers.

(...continued)
February 2010 at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-296111A1.pdf.
98 Office of Management and Budget, Budget of the U.S. Government, Fiscal Year 2011, Summary Tables, Table S-8,
p. 169.
99 A New Era of Responsibility: Renewing America’s Promise, Office of Management and Budget, Table S-6, p. 126.
100 For example, 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. 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.
101 P.L. 108-494, Title II, Sec. 209 (a).
102 GAO, Telecommunications: Strong Support for Extending FCC’s Auction Authority Exists, but Little Agreement on
Other Options to Improve Efficient Use of Spectrum,” December 20, 2005, GAO-06-236, p. 2.
103 Ibid., p. 10, footnote 15.
104 47 USC § 158 (a).
105 47 USC § 159 (a).
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It seems unlikely that new licensing fees would even out any competitive imbalances, if they
exist, between companies that have purchased licenses and those that have not. Licensing fees
might serve other policy goals, however. For example, if the purpose of a new user fee regime is
to encourage more efficient use of spectrum, one approach might be to assess fees on any license-
holder that does not take steps to maximize the benefit of its spectrum holdings. Fees could
become a tool for implementing wireless broadband if policy determines that broadband networks
provide the maximum value to society (the ultimate owner of the spectrum holdings).
Access to Spectrum
Past Congresses have introduced legislation addressing various aspects of access to spectrum and
wireless networks. Among the issues that have been frequently raised and are still matters of
concern to Congress are municipality-owned broadband networks, the possibility of creating a
network that would offer free basic broadband connectivity for free, the designation of new
frequencies for unlicensed use, and public safety communications.
Community Broadband
Rural communities have on occasion used their resources to install fiber-optic networks in part
because they were too small a market to interest for-profit companies. Networks that depend on a
fiber-optic cable backbone are capital-intensive and usually more profitable in high-density urban
areas. Increasingly, communities of all sizes are looking at wireless technologies to support their
networks. Municipalities, for example, are installing free Wi-Fi zones. Among the reasons often
cited for installing wireless facilities are that generally available access to the Internet through
wireless connections has become an urban amenity, a necessity in sustaining and developing the
local economy, and a part of essential infrastructure with many public benefits.106
Opponents to community-owned networks contend that they provide unfair competition,
distorting the marketplace and discouraging commercial companies from investing in broadband
technologies. In particular, the fact that urban areas are creating Wi-Fi networks and providing,
among other services, free wireless links to the Internet is viewed as a threat to commercial
companies.
Several states have passed laws prohibiting or limiting local governments’ ability to provide
telecommunications services. An effort to challenge such a law in Missouri by municipalities
offering local communications services in the state was heard before the U.S. Supreme Court in
2004.107 In the Telecommunications Act of 1996, Congress barred states from “prohibiting the
ability of any entity to provide any interstate or intrastate telecommunications service.”108 The
Court ruled that “entity” was not specific enough to include state political divisions; if Congress
wished specifically to protect both public and private entities, they could do so by amending the
language of the law. This Court decision and the steady improvement in broadband
communications technologies that municipalities wish to have available in their communities
have provided fuel for a policy debate about access to broadband services.

106 The Federal Trade Commissions’ Internet Access Task Force has published a report discussing many aspects of
municipal broadband implementation and related issues, at http://www.ftc.gov/opa/2006/10/muniwireless.htm.
107 U.S. Supreme Court, Docket Number 02-1238.
108 47 U.S.C. 253 (a).
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National Deployment of Free Broadband
During 2007, the FCC was petitioned by several companies, led by M2Z Networks Inc., to
release 20 MHz of spectrum licenses at 2155-2175 MHz for a national broadband network. M2Z
offered to provide free basic service to consumers and public safety and offer content filtering for
family-friendly access. In return for the grant of the license, which would be assigned without
auction, M2Z offered to pay a percentage of gross revenues to the U.S. Treasury. In September
2007, the FCC issued a Notice of Proposed Rulemaking to establish service rules for the auction
of a license or licenses at 2155-2175 MHz, designated as Auction AWS-3.109 Proposed provisions
include obligations to offer free broadband service similar to that proposed by M2Z and family-
friendly access. The proposed spectrum band is adjacent to bands previously auctioned in the
Advanced Wireless Service (AWS-1) auction that concluded in 2006. T-Mobile, a major winner in
the AWS-1 auction, has stated to the FCC that the network proposed by M2Z would cause
“pervasive harmful interference” to licensees of the AWS frequencies.110 The concept of a lifeline
broadband service has significant support from many policy makers in Congress. The FCC did
not act on the auction proposal and the issues surrounding it remain unresolved.
Unlicensed Use
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. 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 garage door openers and Wi-Fi communications.
New technologies that can use unlicensed spectrum without causing interference are being
developed for vacant spectrum designated to provide space between the broadcasting signals of
digital television, known as white spaces. On September 11, 2006, the FCC announced a
timetable for allowing access to the spectrum so that devices could be developed.111 Devices
using the white space frequencies would be required to incorporate geolocation technology to
signal when and where potential interference was detected.112 A geolocation database would be
created and maintained to facilitate sharing of the white space by authorized devices. The design
and operation of this database is being studied by the FCC. The National Association of
Broadcasters (NAB), and others, have protested the use of white space for consumer devices on
the grounds that they could interfere with digital broadcasting and with microphones used for a
variety of purposes.113 Companies such as Microsoft, Dell, and Motorola, however, have stated
the belief that solutions can be found to prevent interference. In November 2008, the FCC

109 FCC, Notice of Proposed Rulemaking, WT Docket No. 07-195, released September 19, 2007.
110 See for example, comments by T-Mobile USA, Inc. filed July 25, 2008, FCC, Docket No. 07-195.
111 FCC, First Report and Order and Further Notice of Proposed Rule Making, ET Docket No. 04-186, released
October 18, 2006.
112 Geolocation associates a geographic location with a device using embedded information such as an IP address, Wi-
Fi address, GPS coordinates, or other, perhaps self-disclosed information. Geolocation usually works by automatically
looking up an IP address.
113 In addition to filed comments with the FCC. NAB, the Association for Maximum Service Television, and a coalition
of theater groups, sports leagues, and TV networks have challenged the FCC white spaces order in the U.S. Court of
Appeals for the District of Columbia.
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established rules that permit the unlicensed use of the white spaces, with special provisions to
protect microphone use.114
Requirements intended to protect microphone use in the white spaces are proposed in the
Wireless Microphone Users Interference Protection Act (H.R. 4353, Representative Rush). The
act would guarantee that specified types of wireless microphone operators would be permitted to
use the white spaces and to have access to the geolocation database.
Public Safety
The transition from analog to digital television freed up spectrum in the 700 MHz band. Most of
this spectrum was auctioned in 2008. Congress had previously directed the FCC to assign 24
MHz in this band to public safety use;115 these frequencies were therefore not part of the 2008
auction. Provisions in the auction rules, however, provided for a new, interoperable
communications network for public safety users to be shared with commercial users.116 A Public
Safety Licensee was designated by the FCC and assigned a single, national license for part of the
24 MHz originally set aside for public safety use. A national license for 10 MHz, designated as
Upper Block D, was put up for auction under service rules that required working with a Public
Safety Licensee to build and manage a shared network. The costs of building the network would
be borne by the D Block licensee. The two licensees (public safety and commercial) would have
been required to negotiate a Network Sharing Agreement, subject to FCC approval.117 The
auction did not yield a winner for the D Block and so the FCC began the process of drafting new
auction rules for that license.118 A new auction for the D Block has yet to be announced.
There is currently no federal plan to assist in building a nationwide, interoperable network for
public safety; a partnership would give some public safety agencies access to private-sector
capital and expertise to build the network. Although public safety users would be charged for
access to the network, proponents of the plan argued that overall costs would be less than if the
network were purely for public safety, because of greater economies of scale. The FCC agreed
that sharing was desirable, citing reasons such as efficient use of spectrum resources. Sharing
would provide public safety with the communications capacity to respond in critical situations
and also support commercial uses in normal circumstances. However, the FCC may need
assistance from Congress in order to further plans for a shared network. Several proposals for
how to create this network would require Congress to amend past legislation; federal funding
might also be necessary to aid in the planning and building of the envisioned network.

114 FCC News, “FCC Adopts Rules for Unlicensed Use of Television White Spaces,” November 4, 2008.
115 As required by Title III of the Balanced Budget Act of 1997 (P.L. 105-33).
116 FCC, Service Rules for the 698-746, 747-762 and 777-792 MHz Bands, Second Report and Order, Docket No. 06-
150, released August 10, 2007 at http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-07-132A1.pdf.
117 FCC plans for the D Block are discussed in CRS Report R40859, Public Safety Communications and Spectrum
Resources: Policy Issues for Congress , by Linda K. Moore.
118 FCC, Auction of the D Block License in the 758-763 and 788-793 MHz Bands, Order, Docket No. 07-157, released
March 20, 2008 at http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-08-91A1.pdf.
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Conclusion
Telephone service was once considered a natural monopoly, and regulated accordingly. The
presumption was that redundant telephone infrastructure was inefficient and not in the public
interest. State and federal regulators favored granting operating rights to a single company, within
a specific facilities territory, to benefit from economies of scale, facilitate interoperability, and
maximize other benefits. In return for the monopoly position, the selected provider was expected
to fulfill a number of requirements intended to benefit society. Thus, for decades, the regulated
monopoly was seen by most policy-makers as (1) ensuring that costly infrastructure was put in
place and (2) meeting society’s needs, as interpreted by regulations and the law.119 Past policies to
regulate a monopolistic market may have influenced current policies for promoting competition.
The FCC’s emphasis on efficiency for delivering services to a pre-determined market could be
leading wireless competition toward monopoly; new regulatory regimes might be a consequence
of this trend, if it continues.
Current spectrum policy seeks to maximize the value of spectrum by encouraging economies of
scale and appears to treat spectrum assets as an extension of existing infrastructure (spectrum
license ownership and network management, for example) instead of an alternative infrastructure
(Wi-Fi and wireless backhaul are examples). This policy course has provided a form of workable
competition that has brought wireless services (until 2006, almost exclusively voice) at affordable
prices to most of the country. However, wireless technology has reached an inflection point and is
shifting from voice to data. Some argue that wireless policy should also shift, placing a greater
value on innovation to achieve goals deemed to be in the public interest. A policy that prioritizes
providing spectrum to spur innovation, for example, could create new markets, new models for
competition, and new competitors. If spectrum policy serves broadband policy and broadband
policy serves multiple sectors of the economy, then perhaps spectrum should be more readily
available for a wider pool of economic participants.
The amount of spectrum needed for fully realized wireless access to broadband is such that
meeting the needs of broadband policy goals could be difficult to achieve through the market-
driven auction process unless large amounts of new radio frequencies can be identified and
released for that purpose.120 Without abandoning competitive auctions, spectrum policy could
benefit from including additional ways to assign or manage spectrum that might better serve the
deployment of wireless broadband and the implementation of a national broadband policy.
In response to Congress’s intent to use competitive methods to expand the market for wireless
service, the FCC spliced a competitive model onto a regulatory root. The resulting hybrid
achieved the goal of spreading wireless access but may have excluded innovative new players.
The policies worked well enough when most of wireless traffic was voice. They may not work
well enough to meet the new goals that Congress and the Administration are setting for
broadband deployment and technology as an engine of growth.

119 The original Communications Act of 1934 codified many regulations for monopolies as practiced at the time.
120 International Telecommunications Union projects an estimated need for additional spectrum capacity that could
reach nearly 1,000 MHz in the United States, as reported in “Summary of Results of ITU-R Report M. 2079,” p. 13,
presented by Cengiz Evci, Chief Frequency Officer, Wireless Business Group, Alcatel-Lucent, August 28, 2007.
Available at http://standards.nortel.com/spectrum4IMT/Geneva/R03-WRCAFR07-C-0024.pdf. See also CTIA-The
Wireless Association, Written Ex Parte Communication, FCC, GN Docket No. 09-51, September 29, 2009, which
suggests a goal of at least 800 MHz, based on extrapolations from the ITU research.
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Appendix A. Top Ten U.S. Wireless Companies by
Number of Subscribers
The following table is based on Federal Communications Commission (FCC) rankings of
facilities-based wireless companies121 for 2007,122 updated to reflect reported numbers of
customers at year end 2008. The United States had approximately 270 million mobile phone
subscribers at the end of 2008.123 Not included in this table are resellers such as Virtual Mobile
Network Operators (VMNOs) which create virtual networks by purchasing access from facilities-
based operators.
Customers for prepaid wireless services are a growing segment of the wireless market. The two
largest companies specializing in prepaid services are VMNOs: TracFone Wireless with 11
million customers and Virgin Mobile USA with 5.38 million customers. On July 28, 2009, Sprint
Nextel announced its intention to acquire Virgin Mobile USA.124
Table A-1. Facilities-Based Wireless Companies Ranked by U.S. Subscribers
Wireless Customers in
Company
Thousands
Verizon Wireless
83,700
AT&T Mobility
77,000
Sprint Nextel
50,500
T-Mobile 32,100
U.S. Cel ular
6,200
Metro PCS
5,400
Leap Wireless International
3,840
Centennial Wirelessa
1,100
Cincinnati Bel Wireless
551
nTelos Wireless
407
Source: Compiled by CRS from company annual reports and press releases.
a. Subject to FCC approval and other conditions, AT&T acquired Centennial Communications in 2009. 2008
wireless subscriber number is for the United States and Puerto Rico.



121 Facilities-based mobile telephone operators own and operate their network facilities.
122 Thirteenth Report; annual report and analysis of competitive market conditions with respect to commercial mobile
services, FCC, DA 09-54, released January 16, 2009, Table A-4, p. 138.
123 Statistic provided by CTIA—The Wireless Association.
124 Sprint News Release, Sprint Nextel to Acquire Virgin Mobile USA,” July 28, 2009 at
http://newsreleases.sprint.com/phoenix.zhtml?c=127149&p=irol-newsArticle_newsroom&ID=1312854.
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Appendix B. Spectrum-Hungry Technologies
Enabling technologies that are fueling both the demand for mobile broadband services and the
need for radio frequency spectrum include Long Term Evolution, WiMAX; fixed wireless; Wi-Fi;
high performance mobile devices such as smartphones and netbooks; and cloud computing. Fixed
wireless and Wi-Fi are not new technologies but mobile broadband has given them new roles in
meeting consumer demand.
Long Term Evolution (LTE)
LTE is the projected development of existing 3G networks built on Universal Mobile Telephone
System (UMTS) standards.125 Like all fourth-generation wireless technologies, LTE’s core
network uses Internet protocols. The network architecture is intended to facilitate mobile
broadband deployment with capabilities that can deliver large amounts of data, quickly and
efficiently, to large numbers of simultaneous users. LTE will likely be implemented in stages
through modifications to networks using frequencies in bands already allocated for commercial
wireless networks.126 LTE can also operate on spectrum bands at 2.3 GHz, 2.5 GHz, and 3.4
GHz.127 Many of the global mobile network operators have reportedly announced their intention
to move to LTE. 128 Verizon plans to provide LTE service to 25 to 30 U.S. markets by the end of
2010.129
WiMAX
WiMAX provides mobile broadband but its earliest applications were for fixed wireless services.
WiMAX (Worldwide Interoperability for Microwave Access) refers to both a technology and an
industry standard, the work of an industry coalition of network and equipment suppliers.130
WiMAX uses multiple frequencies around the world in ranges from 700 MHz to 66 GHz. In the
United States, available frequencies include 700 MHz, 1.9 GHz, 2.3 GHz, 2.5 GHz and 2.7 GHz.

125 Alcatel-Lucent, a major communications technology provider, on March 31, 2009 announced a network technology
that can simultaneously support LTE and the 3G standard known as CDMA. Press release at http://www.alcatel-
lucent.com/wps/portal/
!ut/p/kcxml/04_Sj9SPykssy0xPLMnMz0vM0Y_QjzKLd4x3tXDUL8h2VAQAURh_Yw!!?LMSG_CABINET=Docs_
and_Resource_Ctr&LMSG_CONTENT_FILE=News_Releases_2009/News_Article_001510.xml. See also, “Mobile
Broadband Evolution: the roadmap from HSPA to LTE,” UMTS Forum, February 2009, Universal Mobile Telephone
System Forum at http://www.umts-forum.org/.
126 The FCC has approved an LTE device that will transmit in the 1,700 MHz band and receive in the 2,100 MHz band.
FCC, Certificate of Compliance, Test Report, Report No. HCT-RF09-0309, FC ID: BEJLEO3, March 9, 2009. LTE is
also expected to be approved for operation on spectrum licenses at 700 MHz.
127 Spectrum is segmented into bands of radio frequencies and typically measured in cycles per second, or hertz.
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.
128 “Mystery LTE Device Gets OK From FCC,” by Marin Perez, Information Week, March 20, 2009.
129 “Verizon’s Seidenberg: Wireless Industry Innovation Can Help Put U.S. Economy Back on Path to Growth,”
Verizon News Release, April 1, 2009, http://newscenter.verizon.com/press-releases/verizon/2009/verizons-
seidenberg.html.
130 Founding members of the WiMAX Forum include Airspan, Alvarion, Analog Devices, Aperto Networks, Ensemble
Communications, Fujitsu, Intel, Nokia, Proxim, and Wi-LAN. For additional information, see
http://www.wimaxforum.org/.
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The introduction of WiMAX in the United States is being jointly led by Sprint Nextel
Corporation and Clearwire Corporation under the name Clearwire. Clearwire Wi-MAX, branded
CLEAR, plans to serve 80 markets by the end of 2010.131
Fixed Wireless Services
Fixed wireless services have taken on new importance as a “backhaul” link for 4G. Backhaul is
the telecommunications industry term that refers to connections between a core system and a
subsidiary node. An example of backhaul is the link between a network—which could be the
Internet or an internetwork that can connect to the Internet—and the cell tower base stations that
route traffic from wireless to wired systems. Two backhaul technologies well-suited for mobile
Internet access are fiber optic cable and point-to-point microwave radio relay transmissions.132
Network expansion plans for WiMAX and LTE include microwave links as a cost-effective
substitute for fiber optic wire under certain conditions. Radio frequencies available in the United
States for microwave technologies of different types start in the 930 MHz band and range as high
as the 90 GHz band. It is possible that some frequencies may be designated for wireless backhaul
in frequencies between 450 MHz and 698 MHz.133
Wi-Fi
The popularity of Wi-Fi is often cited as a successful innovation that was implemented using
unlicensed frequencies.134 Wi-Fi provides wireless Internet access for personal computers and
handheld devices and is also used by businesses to link computer-based communications within a
local area. Links are connected to a high-speed landline either at a business location or through
hotspots. Hotspots are typically located in homes or convenient public locations, including
airports and café environments such as Starbucks. In 2008, there were over 7,000 Starbucks
locations with Wi-Fi access in the United States.135
Wi-Fi uses radio frequencies in the free 2.4 GHz and 5.4/5.7GHz spectrum bands. Many 3G and
4G wireless devices that operate on licensed frequencies can also use the unlicensed frequencies
set aside for Wi-Fi.136 In 2008, 387 million Wi-Fi chip sets were shipped, worldwide. Of these
200 million were for use in cellular Wi-Fi phones, smartphones, personal computer notebooks,
and other mobile Internet devices.137

131 “Clearwire Launches Development Network,” by Marguerite Reardon, CNET Reviews, CTIA 2009, April 2, 2009,
http://reviews.cnet.com/8301-12261_7-10210495-51.html
132 A discussion of backhaul technology is part of the testimony of Ravi Potharlanka, Chief Operating Officer, Fiber
Tower Corp., at House of Representatives, Committee on Energy and Commerce, Subcommittee on Communications,
Technology, and the Internet, “An Examination of Competition in the Wireless Industry,” May 7, 2009.
133 Being considered under FCC ET Docket No. 04-186.
134 Unlicensed frequencies are bands set aside for devices approved by the FCC. The frequencies are effectively
managed by the FCC instead of by a license-holder.
135 “Starbucks to Expand Technology Relationship with AT&T,” Starbucks Corporation Press Room, February 11,
2008, http://www.starbucks.com/aboutus/pressdesc.asp?id=826.
136 “Wi-Fi Popular Now in Smartphones, Set to Boom,” by Matt Hamblen, Computerworld, April 1, 2009.
137 “Wi-Fi Chipset Sales Grew 26 Percent to 387 Million in 2008,” Wi-Fi Alliance Press Room, January 8, 2009,
http://www.wi-fi.org/pressroom_overview.php?newsid=770.
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Smartphones and Netbooks
Two of the fastest growing segments in the category of mobile Internet devices are smartphones
and netbooks. The introduction of Apple Inc.’s iPhone, in January 2007, is widely viewed as
heralding a new era in wireless smartphones. The smartphone market is predicted to thrive on
growing demand for downloadable applications,138 interactive websites, and imaginative videos—
all delivered wirelessly. A parallel development has been the accelerating use of netbooks. These
book-sized laptop computers are designed to provide broadband wireless access to the Internet.139
The line between smartphone and netbook technologies is fading as the newer generations of
these devices provide many of the same features. The majority of these new devices can operate
on Wi-Fi as well as over 3G and 4G networks using licensed frequencies.
Cloud Computing
Cloud computing is a catch-all term that is popularly used to describe a range of information
technology resources that are separately stored for access through a network, including the
Internet. An Internet search on Google, for example, is using cloud computing to access a rich
resource of data and information processing. Network connectivity to services is another resource
provided by cloud computing. Google Inc. also offers word processing, e-mail and other services
through Google Docs. Although off-site data processing and information storage are not new
concepts, cloud computing benefits from the significant advances in network technology and
capacity that are hallmarks of the broadband era. Cloud computing can provide economies of
scale to businesses of all sizes. Small businesses in particular can benefit from forgoing the costs
of installing and managing hardware and software by buying what they need from the cloud.
Consumers also can benefit because they no longer need to buy personal computers in order to
run complex programs or store large amounts of data. The convergence of 4G wireless
technology—with its smartphones and netbooks—and the growing accessibility of cloud
computing to businesses and consumers alike will contribute to the predicted explosive growth in
demand for wireless bandwidth.140







138 See, for example, “Smart Phones are Edging Out Other Gadgets,” by Christopher Lawton and Sara Silver, The Wall
Street Journal, March 25, 2009, for a discussion of how “beefed up cellphones” are replacing some electronic devices
as their functions are incorporated into smart phones.
139 “Light and Cheap, Netbooks Are Poised to Reshape PC Industry,” by Ashlee Vance and Matt Richtel, The New
York Times, April 2, 2009.
140 The many factors driving demand for mobile broadband and the impact of growth in data and video services on
demand for spectrum are reviewed in Mobile Spectrum Broadband Demand, Rysavy Research, December 2008.
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Appendix C. Barriers to Competition in the Wireless
Industry
In evaluating competition within an industry, economists and policy makers examine barriers to
entry, among other factors.141 Barriers might come from high costs for market entry such as
investment in infrastructure or there might be legal and regulatory barriers to entry. The Federal
Communications Commission (FCC) has noted the possibility of “coordinated interaction”
among wireless providers in pricing and services, which it attributes primarily to a concentrated
market and barriers to entry such as high capital costs.142 As part of its evaluation of competition
for mobile services, the FCC has identified three factors that could constitute barriers to entry to
the commercial mobile communications industry. These barriers affect not only competitiveness
but also access to networks and investment in new technology. The factors are: “first-mover
advantages, large sunk costs, and access to spectrum.”143 All three of these factors are subject to
regulations that have been influenced by past or existing policies regarding spectrum allocation
and assignment.
First-mover advantages144 have accrued primarily to the early entrants in the wireless industry.
Early in the development of the cell phone industry, the FCC created cellular markets and
assigned two spectrum licenses to each market; one license went automatically to the incumbent
provider in that market. The second license was made available to a competing service provider
(not the market incumbent); the difficulties in choosing the competitors that would receive
licenses contributed to the subsequent move to auctions as a means for assigning spectrum
rights.145 These early entrants, and the successor companies that acquired them and their licenses,
have maintained their core customer base and benefit from early investments in infrastructure.
Many first movers into the wireless market, therefore, acquired their market-leader status through
regulatory decisions that provided them with spectrum licenses, not through market competition.
Large sunk costs refer to the high levels of investment needed to enter the wireless market. Not
including the price of purchasing spectrum, billions of dollars are required to build new
infrastructure. The sunk costs of incumbent wireless service providers set a high bar for new
entrants to match if they are to compete effectively in major markets. In the mobile telephone
industry, the FCC has observed that most capital expenditures are spent on existing networks: to
expand and improve geographic coverage; to increase capacity of existing networks; and to
improve network capabilities.146 Performance requirements for spectrum license-holders, such as

141 For example, U.S. Department of Justice and the Federal Trade Commission, “Horizontal Merger Guidelines,”
Jointly issued April 2, 1992, revised April 8, 1997.
142Thirteenth Report; annual report and analysis of competitive market conditions with respect to commercial mobile
services, paragraph 110, additional discussion in paragraphs 100 and 101.
143 FCC, “Wireless Telecommunications Bureau Seeks Comment on Commercial Mobile Radio Services Market
Competition,” Public Notice, February 25, 2008, DA 08-453, WT Docket No. 08-27 at http://hraunfoss.fcc.gov/
edocs_public/attachmatch/DA-08-453A1.pdf. Earlier annual reports have also cited these barriers.
144 The initial occupant of a market segment may benefit from a number of advantages such as preemption of resources,
advantageous relationships with customers and suppliers, and early profits for re-investment in infrastructure.
145 The distribution of licenses for cell phone networks from the early days of the technology until the introduction of
auctions is described in Wireless Nation: The Frenzied Launch of the Cellular Revolution in America, by James B.
Murray, Jr., Perseus Press, 2001, 2002.
146 Thirteenth Report, paragraph 155.
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the size of a market that must be served or deadlines for completing infrastructure build-outs, are
some of the policy decisions that can add to the cost of entry.
Access to radio frequency spectrum is an essential input for producing wireless communications.
The FCC has stated that “Government control of spectrum allocation and assignment has the
potential to create a barrier to entry.... ”147 Among the steps the FCC has reported taking are (1)
making more spectrum available for Commercial Mobile Radio Services (CMRS); and (2)
implementing usage rules that allow license-holders to decide which services to offer and what
technologies to use on their CMRS holdings; and permitting CMRS license-holders to buy and
sell their licenses in secondary markets.
In analyzing competition in rural areas, the FCC compared the availability of spectrum for
wireless use in rural and urban counties. To do this, it measured the amount of licensed spectrum
used for CMRS that was not held by the four nationwide providers (Verizon Wireless, AT&T,
Sprint Nextel, and T-Mobile USA). It found that, in urban areas, 46% of the counties had more
than 100 MHz of spectrum not licensed to the top four and, in rural areas, 80% of the counties
had more than 100 MHz of spectrum not licensed to the nationwide carriers.148 The analysis also
showed that 96% of rural counties (representing 91% of the rural population) had at least 50 MHz
of spectrum that was not being used to provide mobile telephone service. At least 50 MHz of
spectrum was potentially available in 85% of the urban counties, covering 68% of the urban
population.149


147 Ibid., paragraph 65, additional discussions in paragraphs 66 and 67.
148 Ibid., paragraph 106.
149 Ibid., paragraph 107.
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Appendix D. International Policies for Spectrum
Management
Spectrum allocation is not a uniquely domestic process. Some spectrum allocations are governed
by international treaty. Additionally, there is a trend to harmonize spectrum allocations for
commercial use across countries through international agreements. Harmonization of radio
frequencies is achieved by designating specific bands for the same category of use worldwide.
With harmonization, consumers and businesses are able to benefit from the convenience and
efficiency of having common frequencies for similar uses, thus promoting development of a
seamless, global communications market. Spectrum allocation at the national level, therefore, is
sometimes coordinated with international spectrum allocation agreements. The Advanced
Wireless Services (AWS) auction in the United States, completed in 2006,150 was the conclusion
of a process initiated by an agreement for international harmonization of spectrum bands.151 At
this auction, T-Mobile was able to acquire new spectrum licenses that improved its
competitiveness in the United States152 and, consequently, the worldwide competiveness of its
owner, Deutsche Telekom.153
The International Telecommunications Union (ITU), the lead United Nations agency for
information and communication technologies, has been vested with responsibility to ensure
interference-free operations of wireless communication through implementation of international
agreements.154 The ITU adopts a Table of Frequency Allocations in conjunction with International
Radio Regulations. This International Table allocates spectrum for various radio services and
includes, directly or indirectly, conditions for the use of the allocated spectrum.155 There is also a
domestic table for each country. The United States Table of Allocations is maintained by the
National Telecommunications and Information Administration (NTIA). The U.S. Table of
Allocations is modified to correspond with changes in international spectrum allocations agreed
to under the auspices of the ITU. These agreements are reached through processes such as the
World Radiocommunications Conferences (WRC). Each WRC provides an opportunity to revise
the International Radio Regulations and International Table of Frequency Allocations in response
to changes in technology and other factors. Modifications to rules from one WRC to the next are
part of an ongoing process of technical review and negotiations. WRC meetings are held
approximately every two years. Provisions that require changes in frequency allocation to

150 FCC News, “FCC’s Advanced Wireless Services (AWS) Spectrum Auction Concludes,” September 18, 2006.
151 The WRC-2000 agreed on spectrum bands to be harmonized for advanced wireless services, referred to as IMT
2000. See FCC News, “International Bureau Reports on Success of the 2000 World Radio Communications
Conference,” June 8, 2000, http://www.fcc.gov/Bureaus/International/News_Releases/2000/nrin0009.html.
152 FCC, Twelfth Report; annual report and analysis of competitive market conditions with respect to commercial
mobile services, Docket No. 07-71, released February 4, 2008, p. 9 and paragraph 75, at http://hraunfoss.fcc.gov/
edocs_public/attachmatch/DA-08-453A1.pdf.
153 Deutsche Telekom owns 100% of T-Mobile International, which includes T-Mobile USA. For information see
“Global Player on the Mobile Communications Market” at http://www.telekom.com/dtag/cms/content/dt/en/530494.
154 The GAO notes that “The federal government considers ITU the principal, competent, and appropriate international
organization for the purpose of formulating international treaties and understandings regarding certain
telecommunications matters.” Better Coordination and Enhanced Accountability Needed to Improve Spectrum
Management, GAO-02-906, September 2003, p. 19, footnote 26.
155 There are 39 internationally defined wireless services, including broadcasting, meteorological satellite, and mobile
services. Description of ITU-R functions are at http://www.itu.int/ITU-/index.asp?category=information&rlink=
rhome&lang=en.
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accommodate new technology will typically take effect 10 to 15 years after agreement is reached.
These delays give time to phase out older technologies and to formulate new investment
strategies.
The possibility of allocating additional spectrum for mobile broadband was among the
deliberations of WRC-07 (October 22-November 16, 2007) and may be considered at the next
WRC, scheduled to be held in January 2012.156 Future decisions about spectrum allocation for
broadband in the United States might be influenced by international agreements. Worldwide
harmonization of frequencies for mobile broadband may be sought in bands at 3 GHz and higher.

Author Contact Information
Linda K. Moore

Specialist in Telecommunications Policy
lmoore@crs.loc.gov, 7-5853



156 The NTIA and FCC websites carry information about planning for WRC 2012. For FCC, see IB Docket No. 04-286,
Public Notice at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-09-763A1.pdf. An NTIA overview is at
http://www.ntia.doc.gov/osmhome/wrc/ntia.html. The ITU site is at http://www.itu.int/ITU-R/index.asp?category=
conferences&rlink=wrc-11&lang=en.
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