Commerce Committee Chairman Ted Stevens' Remarks at the National Spectrum Managers Association's Spectrum Management 2005 Conference

May 24, 2005

WASHINGTON, DC -- Senate Commerce Committee Chairman Ted Stevens today addressed participants of the National Spectrum Manager’s Association Conference. Following is a transcript of his remarks and a questions and answer session that followed:

Thank you very much. It’s nice to be with you. I’m here to talk to you a little bit about spectrum. You know in the last five minutes of the last Congress, the Senate approved the Spectrum Relocation Bill and how that bill became law would make a great mini-series.

I was then Chairman of Appropriations. I originally held the bill up to ensure that the Appropriations Committee had a role in the roughly $9 billion the law would generate, because to generate that kind of income, the Committee then has under the Budget Act to offset additions in spending. It really is a budgeting concept, but it was very important to us at the time.

Then Senator Burns and I worked out a situation where we included the 911 Bill and the extension of Universal Service in that same provision. But, at the last minute there was an objection to what we had done. And, to buy time to prevent the bill from being passed before consideration of our amendment, Senator Burns objected to the adjournment resolution, which is not normal. It was done at a time when I was the speaker at a black tie dinner at the Library of Congress. When I got word that we had problems with the bill, I left that dinner and went back to the floor of the Senate. It’s not often that a Senator shows up at midnight on the floor of the Senate in a tuxedo, but it was something that had to be done. We had some calls to make and it was after midnight that we called several Senators and got them literally out of bed and told them the situation and asked them to make other calls. And, it really was Conrad Burns, Senator Burns, that really was the key to make certain we had the votes to move that bill through after midnight. And, I tell you he’s a very tenacious fellow. It was his real assistance and support that gave us the ability to protect rural customers and cell phone users at the same time. I think that was a very significant bill.

Many of you may not know how the sales of spectrum originated. During the Eisenhower Administration, I was an attorney at the Department of the Interior – the Solicitor of the Interior Department in the last year – and I did a lot of work in oil and gas in my day, practicing law in Alaska and it always bothered me that oil and gas leases when they were turned back in, when the lessee decided they didn’t want them any longer, having bid on them to begin with, they have the right to relinquish them. Then those leases went literally into a box and people paid $25 for the right to put their name in the box and someone drew a name out and that’s how it was determined who got that lease until it expired.

That was the same situation with spectrum when I started analyzing it. And, there again, it just seemed to me that was the wrong way to deal with something that was extremely valuable in my judgment and Senator Inouye and I started off trying to turn spectrum into auctions similar to the solution we made for oil and gas during the Eisenhower Administration. And, this led to the bidding process we all know for spectrum under federal law.

Actually, the CBO at that time, the Congressional Budget Office, said it wasn’t significant revenue that they anticipated, something like $250 million was the amount of money that those spectrum sales might raise. And, as you know, the first sale raised I think close to $17 billion. It has since been one of the great commodities in the communications field, the right to possess spectrum.

The Act that created spectrum auctions expires in 2007 and it is now our duty on the Senate Commerce Committee to find a solution to some of the problems that that expiration date raises. The Budget Resolution that was adopted by the Congress this year requires the House and Senate Commerce Committees to raise $4.8 billion in new revenue for 2010. Our Committee is not normally looked at as a revenue raising Committee – that’s an enormous amount of money. If we could simply take the date out of the old bill, ’07, and extend it a few years, we would automatically be credited with what the CBO or the OMB considers to be the future income from sales of spectrum. We are looking, however, to not just have a simple extension. We’re looking to have a comprehensive bill to deal with many issues and we tried to have an opportunity to meet with the FCC. Our staff has met with their staff to seek recommendations, but, as you know, under the Sunshine Law, we are prohibited from discussing issues with the FCC and its going to be very difficult to try and work out with them the bill that we have under consideration. I do think their views are very important. I really don’t like certain aspects of that law. I do believe they ought to be able to confer with Members of Congress, particularly those working on bills that affect their jurisdiction.

In any event, we are holding what we call a series of listening sessions now, since I’ve become Chairman. Too often we have people come to testify before us and with the way we handle questions, each Senator has five minutes and in the course of five minutes usually gets an answer to one or two questions. And, the witnesses feel sort of stifled. They really can’t give us a long answer, complicated answer, so we’re working under the concept of having listening sessions, where we ask members of a particular section of the industry or their staffs to come visit with us and our staffs on an off-the-record basis and just ask questions and get background information from which we can decide what are the questions we should have hearings on and we will have hearings, formal hearings, as would be required.

But, last week we met with CTIA and the Cellular Association in such a listening session and overall they seemed to be pleased with the FCC’s management of the auction process. They really haven’t recommended too much in the way of changes.

We’ve had preliminary discussions with the high tech industry and in that industry they seek unlicensed spectrum to spur innovation and development if new services.

And, I similarly seek for the Committee your point-of-view and your ideas of what we should try to deal with in this new bill. One of the ideas that has been proposed is giving companies the option of bidding a lesser amount upfront and paying a royalty on future revenues. The idea would be that smaller entrepreneurs would then have a chance to compete for spectrum with the very large conglomerates that would otherwise outbid them and might not put it to work immediately. The idea is that we should stimulate building out the industry by having more participants. Some have suggested that once a company builds out its network, the license should then convert to a property interest, much like a federal mining claim. As you probably know, when a miner locates a claim and then proves that there’s a mineral that can be produced in significant quantities and has economic value, that miner can claim title to the claim and actually apply for and receive a patent, which is the equivalent of a fee title to the claim. It is then that the miner has the right to the land, to mine the land, and to use the land for whatever purpose he wishes to use it after he completes the mining activities. The government has given him complete title to the land. There are a lot of objections to that approach that we have heard. It is something, however, that we have to examine as all of the ideas that are submitted to us.

In the spectrum context, once a network is fully built out, a company could gain title to the spectrum and would no longer have to obtain renewals under that proposal.

Still others have suggested that there should be a fee for the extension of licenses as they expire. And, that approach goes to the question of how much of a showing or intent of how they use the license would be involved, as well as the fee.

What I’m here for today is to tell you we’re looking for ideas. We want to ensure that the system minimizes government requirements, protects the public interest, and at the same time maximizes the American creative spirit to use this spectrum, which is really a very important commodity in our society.

Another issue is government spectrum. The authorization for the National Telecommunications and Information Administration has expired, several of the bills, as a matter of fact, affecting our jurisdiction have expired, and we are working to extend and reenact a bill authorizing that Administration.

One idea that has been suggested to us is to have each federal agency pay its share of the cost of the NTIA management of spectrum. It would be sort of like the General Services Administration in handling buildings. You know, overall they are the manager of federal buildings and they actually acquire title to federal buildings and lease them out to the various agencies that are using them. Of course in terms of the Judiciary, the Judiciary has their own sort of title. But, still in many ways the GSA still helps manage them.

We are now working with Senator Shelby who chairs the State, Justice, Commerce Subcommittee. That subcommittee funds NTIA and has some viewpoints on this issue. They share the jurisdiction of our Commerce Committee – we authorize and they fund that function. And it’s a very interesting concept to determine whether we should take away from government entities the idea that they literally claim to own certain property, where it is government property and create a manager for spectrum that is used by any federal agency. We could, if we did that, allow an agency to sub-lease spectrum that they don’t have any current use for or even co-share spectrum they use or partially use. There are all sorts of combinations we could put into effect if we had such a decision, where there would be a manager of spectrum.

Current policy permits, however, agencies to hold onto spectrum. We’ve all seen that, particularly in the defense areas and some of the larger federal agencies. The problem has been that if they admit that they don’t have any current use for the spectrum, it has been taken away in the past. So, I believe that if they are permitted to share the proceeds of a sub-lease to another agency it could prove to be an incentive to share and maybe even lead to the concept of co-sharing, time-sharing, you might say, which would promote the efficient use of federal spectrum and reduce the amount that the federal government would have to have for its functions.

But, again, back to why we’re working on this. We have an instruction, as I said, to raise the $4.8 billion, but we also have the ability to pass a DTV Transition Bill, that is under the Budget Resolution as passed by Congress. The House Committee has put forward a staff draft and will hold a hearing on their proposal soon. Our Committee is going to continue to hold these series of listening sessions on this topic. We’ll have several this week and thankfully, with the solution brought about last night, we can go ahead with our meetings this morning and on through the end of this week. We, by the way, will take off for the Memorial Day recess at the end of this week and when we come back we want to work to develop a bipartisan bill, that’s the last thing I would talk to you about. Senator Inouye and I have been together now for over 35 years, serving on the same committees. We have traveled together. He is either Chairman or I have been Chairman of the subcommittees on which we serve. We call each other Co-chairman and literally brother, so we have decided that we have a Chair and Co-Chair of the Commerce Committee. It’s the first time that’s happened in the history of the Senate, but it is something that I think is going to be very important to everyone – that we will develop our proposals in Committee on bipartisan way and, hopefully, that means they’ll have a better chance of passage when they get to the floor.

Lastly, let me tell you that the CBO originally told us that a transition date that we had selected would probably not yield significant federal auction proceeds. We have had a range of experts on the subject confer with them and it’s my understanding that they’re going to upgrade their estimate. Their original estimate was that there was so little involved that just merely extending the date a couple of years, would not raise any significant money, would not come close to raising the amount of money that we have to raise. The Budget Act requirement is over the next five years. We don’t have to raise that money all in one year, but in every year we have the direction to raise for five years out. So, there are very few things we can do in our Committee to raise that kind of money other than spectrum. I do believe we will have to pass a spectrum bill during this two year period and it’s my intention to work very hard to see that’s the case. Keep in mind that the legislation we’re working on will affect literally millions of people. We have the thought of going digital and yet millions and millions of people are still using analog sets. As a matter of fact, we’re told that the analog manufacturers all of whom are outside the United States are selling more analog TVs now even though there is definitely going to be a change in the near future and we’re trying to find some way to convince those people that they, too, must convert to digital as quickly as possible – that involves the boxes and who pays for them. There are a whole series of issues related to that transition. But, we’re considering this legislation and if we do it wrong there are literally going to be millions of people that will have to pay a substantial amount to keep their televisions operating at least with the kind of signals they deserve and we think this is a situation where there is no room for error. We must do it right the first time. We must assure that for the lowest cost possible the American people can convert from analog to digital and the transition will be a smooth one and it will be effective and above all, that there will be purchasers for the spectrum as we make it available under this legislation.

Again, I hope that your group will come to us with some ideas and react to some of these that I’ve suggested that other people have presented to us. We look forward to conferring with you and, hopefully, we’ll all see the day when we pass this bill, sometime by the end of this year.

Questions & Answer from the Audience

Question: Are you looking for the DTV bill and the broader spectrum bill to be separate bills, right?

Chairman Stevens: They could be or they could be separate. We have toyed with the idea of putting it all together.

Question: Do you hope both would pass by the end of this year if they are separate?

Chairman Stevens: Separate bills would each run into the same problems, so I don’t know yet. The House wants separate bills, but I’m inclined to put them all together. They don’t face the same problems on the floor that we do, because when they go to the floor they go to the floor with a rule that gives them the right to just brush aside objections and they can even limit amendments. When we go to the floor our bill is wide open and is subject to a filibuster and at times we can eliminate that filibuster by covering subjects that people thought we should have covered as though it came out of Committee. So, I don’t know whether it will be one bill or two. At least, if it’s two bills, we’ll try to get them out at the same time.

Question: Do you favor the 2008 deadline in the draft the House is looking at?

Chairman Stevens: Well, I don’t think I’m prepared to tell you what date I favor. I favor arranging it so we can maximize the concept of raising the money that this spectrum should bring to the government. And, at the present time, I’m not enamored with the idea of the mining claim theory on spectrum. I do think with changing technology that we might end up by having a few follow-ups. I got my Betamax out of the closet the other night. We’re moving and that was a reminder to me that technology can fade awfully fast. So, I do think we ought to keep our eye on the ball and make sure that a licensee who has spectrum is using it to the best advantage of the system.

Question: Do you think the subsidy is necessary to get it to pass, the subsidy program?

Chairman Stevens: The subsidy, you mean the black box?

Question: The subsidy program for people who are wired over-the-air right now, should there be a subsidy program in the bill in order for it to pass, to pay for the converters?

Chairman Stevens: Well, I don’t know. I’m also toying with the idea that those who manufacture analog sets after a certain date, must provide a box with it. I don’t know why these foreign manufacturers shouldn’t shift over to digital and if they don’t, they should give us a box. I’d like to avoid the subsidy and let the buyer have the full value of going to digital and if they want to buy analog now, it ought to transition into the next generation of digital. I’m not sure I’ll win on that, though.