Copyright 2001 Federal News Service, Inc.  
Federal News Service
July 31, 2001, Tuesday
SECTION: CAPITOL HILL HEARING

LENGTH: 23191 words

HEADLINE: HEARING OF THE SENATE COMMITTEE OF COMMERCE, SCIENCE AND TRANSPORTATION
 
SUBJECT: SPECTRUM MANAGEMENT AND THIRD GENERATION WIRELESS SERVICE
 
CHAIRED BY: SENATOR DANIEL INOUYE (D-HI)
 
LOCATION: 253 RUSSELL SENATE OFFICE BUILDING, WASHINGTON, D.C.

WITNESSES:
 
PANEL I
 
WILLIAM T. HATCH, ACTING ADMINISTRATOR, NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION, DEPARTMENT OF COMMERCE;
 
JULIUS KNAPP, DEPUTY CHIEF FOR OFFICE OF ENGINEERING AND TECHNOLOGY, FEDERAL COMMUNICATIONS COMMISSION;
 
LINTON WELLS, II, ACTING ASSISTANT SECRETARY OF DEFENSE FOR COMMAND, CONTROL, COMMUNICATIONS AND INTELLIGENCE, DEPARTMENT OF DEFENSE;
 
PANEL II
 
DENNY STRIGL, CEO, VERIZON WIRELESS;
 
CARROLL D. MCHENRY, CEO, NUCENTRIX BROADBAND NETWORKS, INC.;
 
MARK KELLEY, CHIEF TECHNOLOGY OFFICER, LEAP WIRELESS;
 
THOMAS E. WHEELER, PRESIDENT AND CEO, CELLULAR TELECOMMUNICATIONS AND INTERNET ASSOCIATION;
 
MARTIN COOPER, CHAIRMAN AND CEO, CO-FOUNDER, ARRAYCOMM
 


BODY:
SEN. DANIEL INOUYE (D-HI): We are here today to address two important issues - third generation wireless service and the management of spectrum. Our ability to resolve issues surrounding 3G will have a significant impact on the health and competitiveness of the wireless industry. I expect that a resolution of the 3G issue will also be instructive with respect to policies of spectrum management.

It was in the 1980s that companies like AT&T and the Baby Bells began providing wireless mobile phone service, referred to as cellular service. However, it was only in the 1990s, when Congress authorized the FCC to auction additional spectrum for personal communications service, that the wireless phone industry truly began to blossom. PCS became a catalyst for the industry's transition from analog to digital.

The question we now face is how to complete the next step -- that is, the transition to third generation wireless services. Clearly, whether or not U.S. service providers and manufacturers of third generation service will be able to compete successfully will depend, in part, on the decisions of policy makers. In this regard, we face today in identifying sufficient spectrum for 3G transition.

While the International Telecommunications Union has allocated the 806 to 960, 1710 to 1885, and 2500 to 2690 megahertz bands for 3G service, our industry has set its sights on the 1755 to 1850 megahertz band. Department of Defense, the primary user of spectrum in this band, has indicated that it cannot effectively share the band with 3G technologies. If additional spectrum is necessary for 3G services, some form of compromise must be reached. If the only option is to relocate the Defense Department, we must find comparable spectrum, develop a migration time frame that allows DOD to maintain its operation as it vacates the spectrum and ensure that the department's costs are reimbursed. These monumental tasks must be accomplished without risking any reduction in military preparedness or degradation of systems that support mission capabilities.

We are facing difficult issues with respect to 3G services because, with increasing consumer demand for wireless service, spectrum has become scarce. Congress took an important step in distributing spectrum quickly and efficiently when it authorized the FCC to auction spectrum. Since that time, the FCC has implemented other spectrum management tools such as spectrum caps and band managers in order to promote competition and more quickly disseminate spectrum. As the FCC seeks to implement additional tools for spectrum management, it must make sure that its role in allocating spectrum and assigning licenses is clear. The wireless industry is competitive and consumers have benefited from this competition. However, the FCC must continue to fulfill its responsibility in ensuring that consumers are well served through its spectrum management policies.

And accordingly, I welcome the witnesses and I look forward to hearing your testimony. And may I call upon the chairman for his thoughts?

SEN. ERNEST HOLLINGS (D-SC): Mr. Chairman, we really thank you for setting this hearing. It's probably the most important hearing we'll have in communications this year. And I say that because you have noted that this is not just a customary hearing on spectrum, but that we intend to do something. I say that in light of the fact that 20 years ago, we had similar hearings. When we talked about the actual sale, auction of the spectrum, it wasn't done for the spectrum's benefit and purpose but, on the contrary, just for financial needs.

What we need do is really allocate this spectrum for this 3G mobile satellite system -- wireless system -- on a fair basis. There's no question that the Defense Department will be defended. I'm not worried about the cost. The spectrum monies can reimburse that. And you, more or less, have been in charge, with the defense appropriations, as the ranking member for years. So I'm not worried about reimbursing the Department of Defense.

But I am more concerned that we get something -- you can't get any better witnesses than what we have right at that panel -- but that we get something conclusive out on them, rather than a litany. We know about all the problems. And you can keep on testifying and testifying about these problems. And the next thing you know, the Europeans will go forward with this third generation wireless service. And it could be that yes, the Federal Express man delivering the goods in Europe can talk, but the troops in Kosovo can't. I mean, that's my way of emphasis that we're not in this alone and we're not in charge. We've got to respond to the technological developments. And I don't know of any better hearing.

Let me ask that my full statement in the record -- be included in the record. And I thank you very much.

SEN. INOUYE: So ordered.

Senator Burns.

SEN. CONRAD BURNS (R-MT): Thank you, Mr. Chairman. And thank you for holding this hearing today. As you know, we had talked about this a long time ago. And I appreciate the opportunity of participating in it on this important thing.

I want to remind my colleagues on the panel that if you think that there was a lot of moving parts in the 1996 Telco Act, when you start down the road of reforming and taking a look at managing spectrum and looking at reforms, you haven't seen anything yet. And because this is the information age, it is upon us. Some people believe that we're already there, in the advent of the wireless communication devices, laptops and, of course, hand-helds. I believe we've only begun the journey into the age of information.

Yes, we have witnessed many amazing technological advancements over the past decade. But as a society, we are not fully realized the total impact that these technologies will have on the way we live and the way we interact on a day-by-day basis. Put in another way, the second and third order effects of the information revolution have only begun to occur. For example, I foresee the day when our information devices will be the extensions of our very personalities. The ability to meet and interact with other people, both professionally and personally, will be greatly enhanced by our ability to share information. Already, we have seen entirely new ways to buy goods, through services such as eBay. And as an auctioneer, I take offense to that. No, not really. (Laughter.) That wasn't written in here, folks. I'll guarantee you that.

But I find that an example of real life human interaction. eBay is a second order effect on the simple email technology. Imagine what's going to happen in the 3G -- or the third generation -- industries. 3G offers a personal interconnection never before imagined. When the telegraph and the telephone were invented, we tried to imagine what our forefathers would have thought at such abilities. As we try to envision the communications wonders before us, we are like our forefathers -- completely unaware of what the future in the age of information holds for our children and our grandchildren and yes, our great-grandchildren.

That said, even though our forefathers could not imagine our current technical abilities, their wisdom foretold and facilitated the industrial revolution. Today, we are faced with a similarly daunting task. Clearly, there are many dimensions to the information age, but none more important than the use and the availability of spectrum. The United States Senate must carefully consider this matter. The issue at hand is not simply the allocation of spectrum for 3G, but also how to best define a process for managing this valuable commodity in such a way to ensure national security, ensure -- encourage commerce, but most of all, propel our transition into the information age.

I look forward to working with the chairman and the rest of my colleagues on this panel as we start down this road to reforming the way we manage our spectrum and, of course, making way for the next generation.

Thank you very much, Mr. Chairman.

SEN. INOUYE: I thank you very much. And may I now recognize the vice-chairman of the subcommittee, the gentleman from Alaska.

SEN. TED STEVENS (R-AK): Thank you very much. Mr. Chairman, my office has now been approached by several educational religious groups who want to protect the continued availability of this band, the GHC band. We have also been approached by several industry groups who want this block of spectrum to remain under consideration by the FCC. The first group wanted to have it removed from consideration, obviously. I'm really here because I'd like to find a way to ask both sides: what will be the situation with regard to the total spectrum situation if this block of spectrum is taken off the table? What is its impact, particularly on the spectrum that's now so vital to our national defense?

Thank you very much.

SEN. INOUYE: I thank you.

The gentleman from Oregon, Mr. Wyden.

SEN. RON WYDEN (D-OR): Thank you, Mr. Chairman. And I congratulate you, Mr. Chairman, for holding this hearing and making it clear that we're going to be dealing with a very difficult issue in a bipartisan fashion. Obviously, today's challenge is finding spectrum for 3G wireless. But I'm of the view that someday there's going to be a 4G or a 5G or an entirely different wireless application we haven't even imagined yet. And without fundamental reform, the current firestorm over 3G spectrum, in my view, will just be repeated again and again.

It seems to me that the central problem, I would say to my colleagues, is that we've got a Jurassic system. It's been virtually unchanged since the 1920s, when spectrum was used for radio and radio only. And it's creating all of the wrong incentives. If you're an incumbent license holder, you want to keep licenses scarce, so you occupy as much spectrum as possible and you fight, tooth and nail, against giving any up. In effect, you sort of collect ransom for holding spectrum hostage. And if you've got a bright new idea for the use of spectrum, you better have a lot of patience for a lot of red tape.

And it seems to me we've got a variety of reforms that we ought to be looking at. But to me, one of the centerpieces of that effort ought to be to make sure that licensees in the future need to have some flexibility and incentives to sell or lease excess spectrum, instead of hoarding it. We all understand that this resource, that you can't see or touch, is now one of the most important natural resources in the information age economy. And as far as I'm concerned, we've got to have some reforms that are going to harness the power of marketplace forces if we're going to go about using the spectrum as efficiently as possible.

And I thank you, Mr. Chairman, for the chance to speak for a moment or two this afternoon.

SEN. INOUYE: I thank you very much. And may I now recognize the gentleman from Nevada, Mr. Ensign.

SEN. JOHN ENSIGN (R-NV): Thank you, Mr. Chairman. I also want to thank you for holding this hearing. I'll keep my comments very brief, as I agree with the senator from Oregon that the marketplace is critical, decreasing some of the red tape that goes on. But also, we do have to take in the national security implications here. And I think that those are not mutually exclusive entities. And what we -- I'm looking forward to questioning some of the witnesses and hearing some of their testimony, to try to work some of these issues out. I think it's critical that this body understand these issues. They are very complex. We're dealing not only with making law, but we're dealing in such a scientifically technical area that, you know, we need outside experts to help advise us on these issues, as we do with most issues, but in particularly when we're dealing with such advanced technological issues.

And so, I'm looking forward to working with all of our colleagues here and trying to craft some legislation that will permit us, as America, to make sure that we don't fall behind in so many important areas, especially in technology.

Thank you, Mr. Chairman.

SEN. INOUYE: I thank you very much.

The gentleman from West Virginia.

SEN. JOHN D. ROCKEFELLER IV (D-WV): Thank you, Mr. Chairman. At Katherine Graham's funeral, former Secretary of Defense Jim Schlesinger approached me and we talked about Mrs. Graham for a moment. And he said to me, "Why did you sign that letter?" And I said, "What do you mean?" And he said, "You signed a spectrum letter that sort of relegated the Department of Defense to being irrelevant." And I have a very, very strong friendship and admiration for Jim Schlesinger and so I was really taken aback by that comment. On checking, I found that the letter that we sent was put by, passed through the Defense Department and approved.

But regardless of any of that, it raises the question of the difficulty of what we do. I mean, when I consider what has to be done in defense, I'm overwhelmed. When I consider what has to be done on 3G, much less 5G, I'm overwhelmed. When I consider the approach, the knowledge base in this Congress about spectrum matters, I'm underwhelmed -- (laughter). And when I consider the time we have in which to do something intelligent and useful, I'm again overwhelmed. So this hearing, if anything, is timely.

SEN. INOUYE: I thank you very much. And now, we'll call upon the first panel.

First, the acting administrator of National Telecommunications and Information Administration, Mr. William T. Hatch; then, the deputy chief for the Office of Engineering and Technology, FCC, Mr. Julius Knapp; and the acting assistant secretary of defense for command, control, communications and intelligence, Mr. Linton Wells, II.

Mr. Hatch.

MR. WILLIAM HATCH: Thank you, Mr. Chairman. Mr. Chairman and ranking members and other members of the committee, I want to thank you for inviting me to testify today on spectrum allocation process and also the accommodation of third generation wireless systems in the United States. As you stated, Mr. Chairman, I am Bill Hatch, acting assistant secretary for communications and information, and acting administrator for the NTIA within the Department of Commerce. I am also the associate administrator in NTIA's Office of Spectrum Management.

As members of this committee know, NTIA serves as the spectrum manager for the federal agencies and is also the principal adviser to the president on communications and information policy. Because of NTIA's unique role, the agency must then balance the spectrum interests of the federal agencies, while also advancing policies that promote the benefits of technology development in the United States for all of the telecommunications users.

As you noted, the spectrum allocation process originally established by the Communications Act of 1934 has grown and adapted to changes in both the private sector and the federal government spectrum requirements and for the introduction of new technologies. The Federal Communication Commission, on behalf of the private sector and NTIA on behalf of the federal agencies have coordinated our efforts on a daily basis to assure that spectrum needs of the private sector and the federal government are met now and in the future.

Unfortunately, Mr. Chairman, this task is becoming more complicated given the proliferation and the increase in wireless technology and applications. Available spectrum is particularly scarce in the popular frequency bands we're considering now below three gigahertz. I might note that over 90 percent of the government and private sector authorizations by NTIA and FCC are in the spectrum below three gigahertz. Despite congestion in the frequencies, new demand for spectrum below three gigahertz continues to develop. Thus, finding spectrum below three gigahertz for the deployment of new technologies such as third generation wireless service is a complex and challenging process.

Over the past decade, there has been tremendous growth worldwide in the use of cellular-based wireless communications. The Department of Commerce and NTIA believe that this global growth will continue. While current cellular and PCS wireless systems are expected to evolve into 3G over time, as you noted, there is strong desire from the wireless industry for additional spectrum to establish 3G networks.

The International Telecommunications Union has been fostering the development of advanced mobile systems -- and in that arena, it's commonly referred to as IMT- or International Mobile Telecommunications-2000; we'll refer to it here as 3G -- for a number of years. The last World Radio Conference in 2000 in Istanbul, Turkey adopted a resolution, which states that approximately 160 megahertz of additional spectrum would be needed to meet the projected requirements of 3G in those areas where the traffic is highest. And this need would be by 2010.

There were a number of frequency bands identified at the conference and the resolution provided that each country may determine which of the bands to implement domestically, taking into account the impact on incumbent services. Here in the United States, we are now in the process of deciding which of the various frequency bands is most appropriate for implementation of 3G services.

As a result of the cooperation between the Department of Commerce, Department of Defense and the Federal Communications Commission and other federal agencies, the Department of Commerce, under guidelines set forth last year, has developed an ambitious action plan to identify spectrum for 3G. To date, both NTIA and FCC have completed reports on the 1710 to 1850 megahertz band and the 2500 to 2690 megahertz band that you referred to. We've conducted industry outreach programs with the industry and we participated in the State Department's outreach program with foreign governments and administrations. In addition, you will hear from the FCC and they have also issued a notice of proposed rulemaking addressing 3G allocation issues. And they have received comments from the public on the issues raised in that NPRM.

Because of the complex issues surrounding the allocation of spectrum for 3G, there was a general agreement amongst the Department of Commerce, the FCC and the affected agencies to continue these efforts so that we may carefully study the various spectrum options that have been proposed -- both in our studies, the FCC studies and by the private sector -- so that we can carefully study the various options to arrive at the best possible decision for the United States.

In recognition of this work that remains to be done, Chairman Powell recently sent a letter to Secretary Evans, suggesting that additional time to study all these options would be desirable, and requested that the department work with the FCC to come up with a revised allocation plan and auction timetable. Secretary Evans responded by agreeing with the chairman that continuing these efforts would ensure that the final 3G allocation decision would be the best possible decision we could make. He has directed me to work with the FCC and the federal agencies to develop a new plan for the selection of 3G spectrum and to consider ways to achieve flexibility on the statutory auction date, if such flexibility is needed to implement this new plan. I'm happy to report, Mr. Chairman, that in accordance with Secretary Evans' memo, we have already started preliminary discussions with the federal agencies, including the FCC, about establishing a new plan and timetable for selecting 3G spectrum.

I thank you for this opportunity to share my views with you and would be pleased to answer any questions the committee may have.

SEN. INOUYE: I thank you very much, Mr. Hatch. And may I now recognize Mr. Knapp.

MR. JULIUS KNAPP: Thank you, Mr. Chairman, ranking member and members of the subcommittee. Good afternoon. I am Julius Knapp, the deputy chief of the FCC's Office of Engineering and Technology. And I welcome this opportunity to discuss spectrum management issues and focus on allocations for advanced wireless services, or so-called third generation, 3G mobile radio services.

Unfortunately, Chairman Michael Powell could not be here today, but he shares your interest in spectrum management and the future of 3G. The Commission, throughout its history, has met the challenge of demands for spectrum that exceed the available supply. This challenge is even greater today as we look for ways to accommodate a growing number of new services and technologies in a finite amount of spectrum.

As spectrum usage has grown, so too have the problems of reallocating spectrum for new uses and developing standards to control interference. The commission must maintain its ability to form independent judgments on these technical issues, so that we can make the best use of the spectrum. The commission recognizes that effective spectrum management also relies on the development of polices that encourage efficient use of the spectrum and provide licensees with the flexibility to best meet consumers needs. We continue to develop a wide variety of spectrum management tools to ensure availability of spectrum for the rapid deployment of new and innovative technologies, as well as promoting spectrum efficiency.

One of the most important emerging technologies is 3G or advanced wireless communications services. The regulatory challenges inherent in ensuring the rapid deployment of this service require teamwork on a national scale, as well as attention to the most basic principles of spectrum management. It is crucial that we provide the essential ingredients for success in the marketplace for advanced wireless services -- adequate spectrum capacity and an open, competitive deregulatory environment.

In order to accomplish these goals, we must work together as a nation to ensure a cooperative atmosphere and a unified voice. The commission is dedicated to working with the industry, other agencies and Congress to find and deploy the most suitable spectrum. Today's hearing is an important step toward encouraging the development of shared goals and perspectives. And we welcome the opportunity to testify here today.

Let me briefly outline the past and current situation. Mr. Hatch told you about the developments in the ITU and the process that we've gone through to work together cooperatively. I won't repeat that.

But late last year, the FCC initiated a rulemaking to consider spectrum allocations to facilitate the introduction of advanced wireless services. The commission's Notice of Proposed Rule Making invited comment on the types of wireless services that will be provided and the technical characteristics, the amount of spectrum that may be required, spectrum pairing options and a variety of other issues. I'd like to take a moment to focus on the frequency bands. The commission invited comment on the extent to which the currently allocated spectrum might be used for advanced wireless services, including the frequency bands used by cellular PCS and SMR services and spectrum recently reallocated for commercial use from TV channels 60 to 69, as a result of the transition to DTV.

The commission also invited comment on five new frequency bands that are shown on the chart that we've placed on the easel. We proposed to allocate, for mobile and fixed services, the 1710 to 1755 megahertz band that was designated for reallocation from federal government to non-federal government use under two statutory directives. We sought comment on providing mobile and fixed service allocations for the 1755 to 1850 megahertz band, if spectrum in the band is made available for non-federal government use. We proposed to designate advanced mobile and fixed use of the 2110 to 2150 megahertz and 2160 to 2165 megahertz bands that are currently used for a variety of fixed and mobile service and that were identified previously for reallocation in the commission's 1992 reallocation proceeding.

And we asked for comment on various approaches to the 2500 to 2690 megahertz band, which is currently used for multi-channel, Multipoint Distribution and Instructional Television Fixed Services -- or MDS and ITFS, for short.

So, what's next? The commission staff is evaluating the record in its rulemaking to determine how to proceed. Comments filed by the wireless industry suggest that the 1710 to 1850 megahertz band would be the preferred choice for 3G spectrum. This spectrum would harmonize U.S. spectrum allocations with those in use or planned internationally, permit economies of scale and reduce costs in manufacturing equipment, as well as facilitating international roaming. We've been working in close consultation with the Department of Commerce and the Department of Defense. They are continuing to evaluate whether, in addition to the 1710 to 1755 megahertz band that has already been identified for transfer, spectrum may be made available in the 1755 to 1850 megahertz band. In addition, the commission staff is working to identify other possible non-government spectrum that might be reallocated for 3G or serve as relocation spectrum.

Industry is also looking at additional spectrum options. CTIA recently filed a petition with the FCC seeking to reallocate spectrum that was allocated previously to the mobile satellite service. As Mr. Hatch explained, there has been an exchange of letters between the chairman of the FCC and the secretary of the Department of Commerce. Both agreed to work together to develop a new plan for selection of spectrum for 3G.

The commission is committed to making spectrum available for new advanced wireless services. And we will continue to work closely with the Congress, the federal government, the Department of Defense and the wireless industry and other spectrum users toward that end. We must approach these issues by balancing the needs of all users through a well-managed national plan.

And I'd like to thank you, Mr. Chairman, for the opportunity to appear before you today. Thank you.

SEN. INOUYE: I thank you very much, Mr. Knapp.

May I now recognize Dr. Wells?

MR. LINTON WELLS: Mr. Chairman, thank you very much, ranking minority and members of the committee. DOD recognizes that spectrum is a precious national and international resource. We recognize the world is changing and that we need to move ahead towards new opportunities. We also recognize our commitment, our importance of being good stewards of the spectrum to which we've been granted access. And I'll talk more about that in a minute. As Senator Burns mentioned, it's very important that we have a process to go forward to allocate this resource properly.

To strengthen our ability to do this, the position of spectrum manager in the department is being elevated to that of a deputy assistant secretary. And we're doing a number of internal organizational changes to improve our ability to participate in both national and international discussions.

Access to spectrum is absolutely crucial for DOD operations, due to the nature of our forces. Mobile ground forces, ships, aircraft can only communicate via the radio frequency spectrum. There's no other way to connect them. Moreover, as we move into the information age and we become a more network-centric force, this reliance on radio frequency will become even more important.

In this context, our national policy must balance the commercial and government needs. To make three points: most U.S. spectrum already is allocated for commercial purposes or for shared commercial and government bands. Of the spectrum most suitable for this kind of mobile wireless -- namely, 700 to 2700 megahertz -- the federal government uses only 14 percent. DOD has access to some of this 14 percent. But in most cases, we share with other government users. So the image of DOD sitting on a large band of spectrum is simply not correct.

Moreover, I would argue that the nation -- indeed, the world -- reaps an exceptional return on the small amount of spectrum that's been made available to DOD since the U.S. military hopes to underwrite not only the economic security and prosperity of our nation, but contributes to global, political and economic stability from which we all benefit. For these reasons, our international peacekeeping and security responsibilities, direct comparisons with how we allocate spectrum and how other nations do so are really not comparable.

You may have heard that DOD is not managing its spectrum efficiently. I would argue this is not the case. We have crowded several major functions and over 100 different systems into the 95 megahertz from 1755 to 1850. We have to justify our continued need for allocated frequencies every five years. In response to Mr. Wyden's point, we cannot just sit on spectrum allocated. We have to rejustify it, sir.

We are also investing in spectrum-efficient technologies, such as the spectrum that allows us to create four satellite channels, where before, we could only use one. And we are investing literally tens of millions of dollars in research and development into finding future more efficient spectrum approaches.

With regard to finding spectrum for third generation wireless, we are ready -- indeed, we are eager -- to participate with our colleagues in the executive branch, with the Congress, with the FCC and with the private sector to find a selection process that leads to the best allocation for the nation of this critical resource. The DOD, along with all Americans, have benefited from the genius of the private sector. And we expect to do so again. But we have to protect the important national security interests that are at stake in this decision. I hope we can all agree on that point.

As you know, the 1755 to 1850 megahertz band has become a particularly attractive part of the spectrum. Let me explain why this is so important to defense. Consider a pilot in the cockpit of an aircraft. He is -- almost all the navigation, almost all the intelligence support, almost all the communications that he receives comes from one of the more than 120 defense and intelligence community satellites that are controlled within this band. In addition, the training he has received comes from the frequencies on the air combat maneuvering ranges, such as those in Nevada, that make our pilots the best in the world.

Beneath his wing may be a precision-guided munitions. The data link for that munition, whose military effectiveness and reduction in civilian casualties make them so important, resides in this band. Underneath the aircraft, on the ground, the backbone of the tactical mobile internet that is becoming so important to our soldiers and to our Marines is carried in this band. And it also provides links to ships overseas. Other important systems, including Army's new soldier radios are in this band.

In sum, there are a number of very critical systems that operate for us here. Moreover, our demand for spectrum is growing.

We forecast a 90 percent increase in demand for mobile spectrum by 2007. If you compare Kosovo to Desert Storm, with one-tenth the number of troops in Kosovo, we used 250 percent of the bandwidth that we had used just 10 years before in Desert Storm. Within the theater itself, from before combat broke out until combat started, the spectrum demand increased 21 times -- not 21 percent; 21 times -- which indicates the burden that combat operations place on the spectrum. As we move to network-centric warfare, which has spectrum at its core, like water for ships and air space for aircraft, this will become even more important.

So if a national decision is made that this is the best band, we are prepared to move. But as you pointed out, Mr. Chairman, there are some prerequisites we need to address. In cooperation with NTIA, we have addressed the possibility of sharing this band. Due to mutual interference, it does not appear that it will be possible to share that 3G band. But to move then, we first of all need to find comparable spectrum. It is not enough just to make a general statement that says, "Somewhere we'll find it. All this spectrum is occupied by someone." And we need to have identified, before the decision is made to move, where we'd be moving into.

Comparable technical characteristics are important. For example, going back to the pilot with his munition under his wing, if the data link is increased to a higher frequency, the pilot will have to approach more closely to his target in order to maintain that data link. That may put him and his aircraft at risk. Alternatively, you can increase the power to the data link. That may make the aircraft more detectable.

Second, even if comparable spectrum can be found, it appears it will be late in the next decade before we will be able to vacate, on two reasons. First of all, the satellites I mentioned earlier are on orbit. We can't just send the shuttle up to retune them. We have to wait until those constellations fly out or spend -- I would argue -- an inordinate amount of money to launch new satellites to replace them. The total value of that constellation is about $100 billion. I honestly can't believe it would be in the best interest of the taxpayers to just relaunch new satellites in order to retune the receivers.

Aside from satellite control, many of the other frequencies dependent on this band may not be available for movement before about 2010. And this is simply the amount of time it takes to redesign, budget for, develop and field a system like the Air Combat Training System.

The final point is compensation -- again, Mr. Chairman, as you mentioned -- and we need a mechanism that makes sure that the money does, in fact, arrive at defense in this compensation. One of the types of frequencies that have been cited that might be relocated is the Army Corps of Engineers fixed point-to-point system. This is true. This system almost certainly could be relocated and perhaps could rely on some of the mobile wireless services that comparable companies are now using. The problem is that moving that function doesn't free up very much spectrum because it's already sharing the band with the satellites and with the air traffic maneuvering. So you could move all the fixed frequency out there and you wouldn't really free up the spectrum.

So far, we've only addressed what it would take to make the federal band feasible option for 3G. The question is, even if it is feasible, does it make sense to relocate this band? I would encourage you to ask the commercial sector: are the commercial spectrum needs really well defined? Is additional commercial spectrum available? Show me the other bar chart, please. There's a very, I think, telling bar chart that compares the amount of spectrum available in different countries for third generation services. And this shows that, for example, in the U.K. and Germany and Japan, there is quite a lot of spectrum that's been made available. It also shows the United States right now -- in one version of a chart -- that there's only 189 megahertz available and that, therefore, we are somehow disadvantaged.

The point, Mr. Chairman, is there actually is more spectrum available in the United States. By one calculation, there is already 228 megahertz available. And in about 10 years, we think that as much as 396 megahertz could be made available. In sum, we would be fully compatible with other countries, what they have provided, on a time- phased rollout of this spectrum, which we think would match the deployment of the commercial systems.

An argument is made on harmonization. If only DOD would move out of this band, then there would be able to get a global 1755 to 1850 megahertz use of this spectrum. That would be very attractive, sir. It will not occur. China has recently decided that its 100 or so million customers will operate in the 2.3 to 2.4 gigahertz band. North Africa is looking at 400 to 800 megahertz. Europe is looking at 2.5 gigahertz. And so, there is not going to be a single band for 3G services around the world.

The argument is also made that if DOD would relocate from this band, it would be easier for us to operate internationally because there would again be sort of a common band in which we could work. The problem is that we have already negotiated agreements, with the host nations in which we operate, to make use of most of our bands. There is an example of an exercise we held in a foreign country where part of the foreign telephone network had to be shut down in order to permit us to exercise. Inconvenient though that may have been overseas, this is exactly the point. The nations that seek our security cooperation have worked with us to find ways to allow our forces to operate in theater. And that's the way we continue to work.

The problem is, when you begin to move one spectrum, it affects a lot of other things. On the AWACS aircraft, there are over 80 different antennas. So if you retune one of those antennas, it's going to have a ripple effect on all the others. And so, just moving one band is not a question of renegotiating one agreement overseas. We'd have to do a whole series of them.

Mr. Chairman, let me conclude. There have been proposals for a win-win solution in which DOD would receive significant financial compensation to surrender the band, beyond the cost of relocating to other bands. We remain open to such a solution if it genuinely involves a win for us. The concern, though, is moot if we cannot get comparable spectrum. We must first find the comparable spectrum into which to move.

And second, while I'm sure these proposals for compensation are made in good faith, we have not yet seen a mechanism by which we could be reasonably sure of receiving the compensation beyond the marginal cost after all the various factors in these decisions come into play.

To summarize, we could in theory move out of the federal band, but we need to do it in ways that will protect national security. And forced relocation prematurely, without comparable spectrum, would have a serious effect on the defense of this nation. That impact would be felt in future missions put at risk, potentially greater casualty to our service members and the denial of critical intelligence to our military and national decision makers.

We look forward to participating in this process, sir. I thank you very much.

SEN. INOUYE: I thank you very much, Dr. Wells. We've just been notified that we have three minutes left to vote. And so, we'll stand in recess for 10 minutes.

(Recess.)

SEN. INOUYE: We'll resume our hearing. May I begin with Dr. Wells?

MR. WELLS: Yes, sir.

SEN. INOUYE: I realize that the GAO has not completed its report, however, they've issued a draft report indicating that they'd like to have more time to study this matter in greater depth. Notwithstanding that, I'd like to see if you can give us some enlightenment, information. If you were required to relocate, how much spectrum would you need?

MR. WELLS: Well, we --

SEN. INOUYE: Do you have any idea?

MR. WELLS: We have 95 megahertz in the 1755 to 1850 band. I mean, a lot of it -- and my first answer would probably be about the same amount, subject to we need to sit down and look at -- just could you combine functions and things like that. For example, there has been discussion of moving some of the satellite control frequencies higher up into what's called the "Unified S-Band.

" I mean, that might be possible, again, in some time, when you can launch new satellites in those frequencies. The problem is that that band is already crowded, and there are regulatory protections. For example, NASA now operates in that band, with a lower regulatory status than something called a broadcast auxiliary band, where a newscaster can go out and, you know, report back from the field.

Obviously, we couldn't operate an intelligence satellite under those circumstances. So, we'd be willing to look at the unified S band and see is you could compress some of the satellite frequencies. And I can't tell you right now whether it's a one-to-one mapping of what we have now or whatever. So, I would say it's about 95 megahertz, subject to some adjustments.

SEN. INOUYE: And what you're telling us is that you have not yet identified any spectrum available to you?

MR. WELLS: Within the government bands, there does not appear to be any spectrum available. I believe we and NTIA agree on that point. So, the question is commercial bands, and those are occupied virtually everywhere by other users, and that then begins a negotiating process that we're not able to decide by ourselves.

SEN. INOUYE: Many of us on this committee are members of the Defense Appropriations Subcommittee, so we're well aware of the investment we have made -- a lot of money. Now, if you were required to move, how much would it cost? Do you have any idea?

MR. WELLS: I can't tell you precisely, sir. Some of the preliminary estimates that came in, I believe were quite low, because they didn't consider timelines. For example, if someone wants us to move out of a satellite band early, one is going to have to build and launch replacement satellites, which is going to be a pretty expensive proposition. So, we're now looking at what it would take under different timelines. If you need to be out by 2008, what does that mean in terms of accelerating the research and development of a system, as opposed to just letting the old one die? So, I'm reluctant now to give you a figure, sir. I'm sorry.

SEN. INOUYE: Will you provide the committee with a response that's in much greater depth on the use of your spectrum efficiently, because there have been those who have suggested that DOD is not using its spectrum efficiently?

MR. WELLS: I would be glad to do that.

SEN. INOUYE: I thank you very much.

Mr. Knapp, we have testimony that will be presented later, which will suggest that we may not need additional spectrum because the present spectrum use is not efficient. What is your assessment?

MR. KNAPP: One of the cornerstones of the commission's policy has been to provide flexibility within the existing spectrum bands that are used by PCS, cellular and the specialized mobile radio service. And there really have been advances in spectrum efficiency through the years as a result of that policy. We're already hearing -- the major cellular carriers and PCS carriers have announced that they're going to begin, as a result of our flexible policies, to offer 3G services within the existing spectrum.

The real issue is as those services grow down the road, and there are more users and more extensive use of data services, that the capacity will need to increase down the road. So I think the commission's overall view is that there is a need for additional spectrum. The real question is the amount and where.

SEN. INOUYE: If I may, I'd like to ask the same question I asked Dr. Wells. Have you been able to identify any spectrum that may be made available to DOD if the move is required?

MR. KNAPP: If a move is required, there are additional bands in this region. And I would stipulate, as a starting point, that all of the spectrum is crowded, and shifting things around is always difficult. But there may be other bands in this region that are worth looking at, that may help solve the relocation problems.

SEN. INOUYE: 95?

MR. KNAPP: I don't know that it would total up to 95, but part of that exercise would involve looking at whether you could repack or shrink some of the use into smaller bands. And it may be able to be done in pieces, rather than one contiguous block.

SEN. INOUYE: How would you suggest that DOD be reimbursed if such be necessary?

MR. KNAPP: Well, under the current legislation, DOD is required to be reimbursed for any relocation that's necessary.

SEN. INOUYE: Should it come out of the auction fee?

MR. KNAPP: I don't know that that is the commission's issue to address. To the extent that it may help relocation, it may be something to look at.

SEN. INOUYE: Do you have any thoughts, Mr. Hatch?

MR. HATCH: Thank you, Mr. Chairman. In our study, we did look at one commercial band that Dr. Wells had just alluded to, the 2025- 2110, as a potential band for the satellite links. We looked at three other government frequency bands as being potential bands for comparability. Only one of those frequency bands was below three gigahertz. The other frequency bands are above three gigahertz, and it would appear that we could accommodate the fixed systems in those frequency bands, but it doesn't appear that we, with government- exclusive spectrum, would be able to identify enough comparable spectrum to satisfy the DOD requirements.

Relative to the reimbursement, the legislation now is that, as you know, the costs would be paid by the winning bidder, in addition to the price that was bid on the spectrum. There have been proposals, and industry has certainly talked about having the proceeds come out of the auction receipts, and that is something that I think certainly warrants further discussion. Thank you, Chairman.

SEN. INOUYE: So, Mr. Hatch, it's your view that at this moment, you're not aware of comparable spectrum that can be made available to DOD?

MR. HATCH: Basically that's true, yes, sir. We've looked at the government-elusive spectrum to see if we could accommodate all of the requirements there. We need to do a more detailed analysis when we determine if spectrum is going to be given up and how much, to determine how much additional spectrum would be needed. But right now, the spectrum we have available to us does not appear to be sufficient to accommodate all of their requirements.

SEN. INOUYE: And Dr. Wells, if the move is required, how long will it take?

MR. WELLS: Some things, like the fixed system that was referred to earlier, could move fairly quickly. The problem with that is that since other systems overlap it, that moving that fixed system would not gain you any spectrum, because other things are using it. The satellite frequencies, we estimate would take until 2017 to fly out the existing constellations and begin launching systems in other bands. The fixed systems is about 2010 -- actually, it's about eight years from whatever year the money begins to be appropriated, because you have to do the research and development. You have to build the systems. You have to test them. You have to field them.

And to do something like the air-combat maneuvering ranges takes a long time -- about eight years, we think, from -- so 2010 is what we're saying for the threshold systems; 2017 for the satellite.

SEN. INOUYE: From you responses, am I to conclude that it is the view of DOD that now is not the time to make a firm decisions -- that we must wait a little while?

MR. WELLS: I believe we need to explore other options, Mr. Chairman.

SEN. INOUYE: Thank you very much.

Senator Burns.

SEN. BURNS: Thank you, Mr. Chairman. You covered most of the questions that I had on my list. And I would ask Dr. Wells, it is hard to forecast anything in government on how long it's going to take to make the move or how much it's going to cost. My question is how long do you think it would take you to develop the planning process of doing such an exercise?

MR. WELLS: I believe that could be done fairly quickly. In fact, we met with Mr. Hatch and with the FCC last week to begin talking about an accelerated process to put on the table as many options as need to be done to find the best national solution to this.

SEN. BURNS: Do you have a working group within DOD that tends to monitor spectrum and how it's used, and how much you've got on the shelf, and have all that information available to you almost at fingertip?

MR. WELLS: We do. We also, and as I mentioned, we are increasing the management visibility into this by creating the new position of DASD for Spectrum Management.

SEN. BURNS: I'm not trying to lead us -- go down the road of saying that this is the only place or possibility that we have in developing 3G is the spectrum now being used by the Department of Defense. There's a lot of us who think that we have a great Department of Defense and we think it's very critical to the security of this country. And we leave it to you fellows or the folks at DOD to assess that and to give us a pretty realistic assessment of what it's going to take to carry out your national security mission.

I would say, and I would ask the panel, if we would disallow any other allocation of spectrum, and with the information that we've got that we're not using what we have -- what the chairman alluded to, that we're not using the spectrum efficiently as we could on what's already been allocated -- what will happen to our R&D on the development of using that spectrum more efficiently? In other words, putting more on the same road as we have now. And, Mr. Knapp, I would ask you that.

MR. KNAPP: The use will always fill out to the available space. So, when there's a smaller amount of spectrum, it tends to drive, as long as you provide flexibility, advances in spectrum efficiency. So, there is a tension there between the amount of spectrum and the pressure to develop more advanced technology -- more spectrum efficient technology.

SEN. BURNS: Mr. Hatch, what's your assessment?

MR. HATCH: Thank you, Senator. I think that we have to look at all of the options that are on the table for the various spectrum that could be made available. I think we have to look at these new efficient technologies that we're all hearing about, and see how efficiently they will make the use of the spectrum, and then try to make the best determination on the amount of spectrum that's available, as well as the particular technical characteristics that one should use to try to use the spectrum more efficiently.

SEN. BURNS: We have a study that's in progress now, that will be completed in November, on the assessment of how we approach spectrum management reform. And it's like I alluded to in my opening statement, I believe if you thought there was a lot of moving parts in the '96 Telco Act, there will be a lot of moving parts as we move down that highway of reforming the way we manage our spectrum. So, I look forward to working with each and every one of you, but I don't want to just hurry -- put together a piece of legislation in haste, and get everybody in the dust, so to speak, and not have a lot of information that we're going to need, or answers to questions that we're going to need before we complete the exercise.

And I think we can work satisfactorily through this, and I look forward to working with you, and I look forward to cooperating with you also, as we tend to look at this big issue. And I thank you for coming today, and I thank you for your testimony.

SEN. INOUYE: Thank you very much.

Senator Stevens.

SEN. STEVENS: Thank you very much. Let me ask you, Dr. Wells, suppose we just told you that you had to use 30 percent less spectrum within two years, could you do that?

MR. WELLS: I believe you'd be putting our people at serious risk, Senator, by doing that. I believe we can migrate over time. I believe there is a way ahead and a national approach to this problem. I believe a precipitous approach is going to cause problems.

SEN. STEVENS: Have you ever analyzed to see how much of the Department of Defense's spectrum use could be provided by the private sector on a contract basis?

MR. WELLS: We have actually looked quite a lot at commercial adjuncts to Defense Department communications. For example, satellite communications. For example, using cellular telephones in lieu of mobile radios. And, honestly, I have gone into this on several occasions thinking, "God, there ought to be a fabulous opportunity to do this." And unfortunately, sir, we've been disappointed every time. We're about to go and look at this again. But, for example, some of the things we need are anti-jam capabilities, which are not part of the commercial need. We need security, which is increasingly able to be provided by sleeves that go on the cellular phones, but not generally there.

One of the things I find very attractive about third generation is we have to work in a networked world, netted together. And thus far, really sort of conference calling by a cell phone is not the same level as military networked radios. We're hoping that 3G will begin to bring that capability to us as well. But thus far, it's been slower than we would've hoped.

SEN. STEVENS: I don't think there are any two stronger supporters of the Department of Defense efforts than the two of us. But on the other hand, we know the redundancies are in your systems. Have you every analyzed to see if we still must maintain those redundancies, particularly in the training phases and in the non- security phases of the operation of the department?

MR. WELLS: Well, as I said, I think the fixed point-to-point is something that could move. I'll take for the record the question about training. Because, if anything, our training is becoming more, sort of, network intensive, as we go to this network-centric warfare. We're increasingly able to make use of simulators, for example, which allows people to train without getting in the cockpits, without getting in the tanks. But the Army is in the process of moving to a digitized force. The Navy is moving to network-centric warfare. The Air Force is introducing many more data links.

And so let me take that for the record and get you a balanced appraisal, but I think it's not as easy to just cut the spectrum as one would expect.

SEN. STEVENS: Well, I hope you will because we have to defend you somewhere down the line and --

MR. WELLS: I understand.

SEN. STEVENS: And I like to make sure that we're starting from a point that's defensible. And if people start coming up with some facts here that I think could be brought up in terms of the redundancy and the excess use of communications and spectrum, I think we're going to be in trouble. I do not think that the department has gone to the point of multiple use of existing spectrum that the private sector has. I don't know whether that's cost or otherwise. I hope you'll analyze it and analyze it well.

MR. WELLS: I would also like to send someone over to meet with your staff to find the specifics that cause you concern and we will address those particularly.

SEN. STEVENS: Let me ask another question.

As I listen to the testimony of the three of you, I'm not sure we're in total agreement on the facts. Do you all agree on the facts of the total allocations and how they've been made, and the basic necessity for Defense to have the spectrum it has now? Do you agree, Mr. Hatch?

MR. HATCH: Thank you, Senator. We have, in fact, reviewed the systems that are in the 17-- actually the 1710 to 1755. Although we have given up the 1710 to 1755 megahertz spectrum -- there are protected sites in there for the DOD, so their spectrum use still remains down in that portion of the spectrum as well -- and looked at the 1755 to 1850, and we have asked some questions of the DOD on the total amount of spectrum that they needed for some of those systems. They are in the process now of obtaining that information and providing it to us, so that I don't have a complete answer at this time, sir. I'd be glad to provide it to you as soon as we have it.

SEN. STEVENS: Well, I asked the question because, from a generational point of view, if you go back to the days of the early allocation of spectrum, it was on a much broader basis and less specific than it is now with the digital assignments of the space now. I don't see how the department can say that the space it got -- the allocation it got in terms of spectrum 30 and 40 years ago is absolutely necessary now, unless it can show that it's using that spectrum in the very modern sense of digital allocation. Have you examined that, Dr. Wells?

MR. WELLS: Well, we have given up, since 1993, 240 megahertz of spectrum, Senator, and so we are adjusting our frequency use based on that loss. There's a program called the Joint Tactical Radio System, which I think is a very instructive example, if I may for a moment. This is what we look at the future of our tactical communications systems. And what we did was we went to industry and said if you would develop a software radio standard -- a standard for software- programmable radio. So instead of having to change the radio with a card, you could actually do it in software. Then we, Defense, would build a system around that commercial standard and then you, industry, could use that standard in the future.

That program, I believe, is going to be, sort of, the wave of the future for our radio approach, and represents an industry partnership that's not only going to be good for them, but also good for us, and much more efficient in the use of spectrum. One of the other things we're looking at is so-called adaptive antennas, where instead of transmitting on a frequency, it samples the frequency and sees if somebody is on this, can I hop to another unused frequency, transmit there. When that gets crowded, hop back to another. So, that's the kind of research that's in place.

And we have, in the test range community alone, $50 million worth of research and development in the next few years on ensuring we have the best allocation of that spectrum.

SEN. STEVENS: If you're sitting on spectrum, if it was looked at from the point of view of recent sales of spectrum, it's worth trillions of dollars. I hope you keep that in mind.

MR. WELLS: We will.

SEN. STEVENS: Mr. Knapp, what's the position of the FCC about the allocations that are there in the Defense side. You really don't analyze that, do you?

MR. KNAPP: No. No, we do not, Senator.

SEN. STEVENS: I would hope that some how or other, we'd find some way to get a level playing field here in terms of the adaptation of the most up-to-date technology for the Department of Defense and see what it needs if it totally was totally digitized -- totally utilizing up to date and the most modern capability we have to take the full advantage of this spectrum.

Dr. Wells, I remember too well when I was in those planes in World War II. We'd crank them two degrees this way, two degrees -- we'd end up at the point in the middle, you know, where everything was protected by at least two extra points on the spectrum. Have you eliminated all of that now -- all of the guesswork -- and gone to really digital use of your spectrum?

MR. WELLS: One of the problems we have, Senator, is the legacy systems that are out there. We are moving towards this. This joint tactical radio system I mentioned is going to be the most modern type of frequency allocation in the world. But we have numbers of systems -- the secretary just recently went out to Omaha, Nebraska to visit the commander of the Strategic Command, and he was looking at some of the radios on those airplanes, which date, in some cases, from the 70s and 80s. And so, we have to work through those old systems before I can tell you, "Yes. We have everything that's as digitally controlled as we'd like to have it."

SEN. STEVENS: Well, I've reminded the committee of this too often, but when I came here to the Senate, the Army controlled communications to Alaska. It was just twisted wire put up by Billy Mitchell (ph), as a matter of fact. We now have totally modern communications and we have more penetration of the digital world per capita in our state than anywhere in the country, because we're no longer under that system, Dr. Wells. And we took full advance of the development of new technologies that came along because of the economics of it, and not because we just were entitled to it.

I really think there's no economic pressure on the Department of Defense, and I wish there was some way we could work that out. I would like to work it out, as the chairman has hinted, that the more spectrum you can find available to sell, we'll give you the money. I think the thing to do is to get the spectrum. The money is immaterial to us right now. We need spectrum now more than we need money.

MR. WELLS: I absolutely agree. We need to find the comparable spectrum to move into. And also, Senator, your point about -- we are desperately seeking the best ways to use it. As I mentioned, we forecast a 90 percent growth in our demand for mobile services in the next five -- next six years. In Kosovo, as I said, we experienced a 21 times increase in the use of bandwidth. And the only way we could fight that war was by commercial leasing. We could not do it with the available equipment in the Department of Defense.

We have got to do this as a public-private partnership, and we have got to squeeze the absolute most out of our spectrum, especially because we are moving to this network-centric concept. One of the things that the secretary is doing now is this Quadrennial Defense Review, which is looking at transformation and a way ahead. Central to this transformed force is the area of space, information and intelligence, and how we share knowledge -- how we build shared awareness, how we self-synchronize our forces. That only happens through the efficient use of the radio frequency spectrum.

SEN. STEVENS: Thank you very much. Thank you.

MR. WELLS: Thank you.

SEN. INOUYE: Senator Wyden.

SEN. WYDEN: Thank you, Mr. Chairman. And I will say, listening to Senator Stevens was well worth waiting for, because I think Senator Stevens and you, Mr. Chairman, and Senator Burns, have all put your hands on it. I mean, the name of the game is figuring out ways to get these technologies that increase efficiency. That is the single most important thing. And I'm glad that you, Mr. Chairman, and you, Senator Stevens, are going to be leading us on the military side, and you're going to have my full support in this effort.

And as far as the civilian side is concerned, I think the problem is, again, that on the civilian side, we have insufficient financial incentives for the development of creative technologies that improve efficiency. And pin down for me, if you would, Mr. Knapp, today, how much of the privately-held spectrum is currently subject to the kind of flexibility, which you've testified today actually increases innovation?

MR. KNAPP: Senator, I'd like to get back to you with precise amounts. But, particularly through the 90s, as new spectrum was allocated, whether it was for PCS, wireless communications services and so forth, we've largely been assigning licenses that have flexibility as to the service that you use, the technology that you use. And, of course, the license is assigned through competitive bidding.

SEN. WYDEN: But as of today, isn't it correct to say that the amount of spectrum on the private side that is open to some flexibility in marketplace forces, it's under 20 percent today, isn't it?

MR. KNAPP: I don't know the exact percentage. But we've been moving towards -- recall, of course, that part of it is allocated for things like public safety and private mobile use. And even there, where we did not have market forces in places, we had mandatory rules that forced efficiency.

SEN. WYDEN: I just think -- the chairman and I have talked with them about it -- is very motivated in the right direction here. But when I look at the civilian side and I say to my colleague -- I mean, what we're doing at this point is we're going to have a proceeding, to have another proceeding, to have another proceeding, and a motion for a proceeding. And my sense is at the end of three or five years, if we don't speed this up and inject some real marketplace forces, the world isn't going to look all that much different on the civilian side.

I see you're nodding your head affirmatively, Mr. Knapp. I probably ought to quit while I'm ahead.

MR. KNAPP: The commission, I think, would generally agree with you that we need to bring market forces to bear to spectrum management, and we've been looking at things to increasingly do that, such as our initiative on secondary markets.

SEN. WYDEN: Mr. Hatch, for a government spectrum user today, what are the incentives to economize on the use of spectrum?

MR. HATCH: Thank you, Senator. We are constantly reviewing the technical standards for our systems. In the mobile area, we have required the government agencies to go narrow banding. We have trunking systems that we require them to use common trunking systems if they're in the same general geographical area. On our radio location and radio navigation systems, which are very high power and have been notorious for causing energy to be in adjacent bands, we're continually looking, with industry, to update our technical standards and try to improve the efficiency of those radars, so that they'll use the spectrum more efficiently and not cause interference in the adjacent bands.

SEN. WYDEN: Those are all good works and there's no doubting at this chair about your desire to do good works. But what are the actual reasons why someone would relinquish or share excess spectrum right now? What troubles me, folks, is that I think we're going to keep repeating this 3G battle year after year unless we retool the system. And Senator Stevens and the chairman talked about some of the efforts they're going to make on the military side. This committee has jurisdiction on the civilian side. And I want to make sure that we get down on the record that the system is the problem. It's not the motivations of you three, which I consider to be very good and in the best interest to serve the public.

Mr. Hatch, you gave me some good examples of good works. But on the question of what incentives there are to economize with respect to spectrum, I don't see it. Maybe I can try once more with this question.

MR. HATCH: Thank you, Senator. We do have, as Dr. Wells has pointed out, our five-year review cycle, where we do review every assignment to all of the government agencies to see the necessity for using the spectrum. We are running short of spectrum to satisfy our requirements -- the same as the private sector. And there are the same incentives there to use more efficient technology, because there is no more spectrum. We have constant requirements coming in from the private sector to share spectrum with government users, and we have come up with some very innovative ways to be able to use the spectrum more efficiently and share with the private sector.

One of those new ways was to look at timesharing between our mobile satellite -- between the private sector mobile satellite systems and our earth exploration-type or space research-type of satellite systems, where we weren't in view all the time and we're not using that spectrum during certain times or in certain geographical areas. The private sector had lower earth orbiting satellites, and we are now coordinating all of our satellite information and data to allow those systems to now share, both geographically and in time, in order to use that spectrum more efficiently.

So I think there are incentives out there to try to keep using the spectrum more efficiently and assure that we are, as Dr. Well has said, good stewards of the spectrum, and are continually using it more efficiently.

SEN. WYDEN: Well, I have to tell you that I'm skeptical of that point of view, and it has nothing to do with your intentions. I'm glad that Senator Stevens and the chairman are going to be looking for ways to continually push the development of creative technologies on the military side. I'm going to try to do it on the civilian side. I think that this system we've got today is a dinosaur. I think it is right out of Jurassic, you know, Jurassic Park. And part of what has happened politically, and you see it in the discussion with the broadcasters and the like, is that anytime anybody talks about a little bit of flexibility, everybody goes into a defensive crouch. And I understand that. I mean, we've got to meet our national security needs. And fortunately, we have a chairman and a ranking minority member who are going to do that.

But it is the system that is skewed, in my view, away from innovation. On the marketplace side, it doesn't have to look at the next exciting opportunities for wireless. The Internet's going to be wireless. We all understand that potential. And we need to do more on the military side. So, I think you, Mr. Chairman, Senator Stevens, Senator Burns, have said it so well. I ought to break my speechifying off at this point. But I look forward very much to working with you and Senator Stevens, and Senator Burns on this, because this is about creating incentives for efficiency. It's hard to make spectrum, you know, fall out of the air, and we all wish there was more. But we can certainly figure out ways to make it more attractive to use what we've got efficiently and I'm anxious to work with you and our colleagues, and I thank you.

SEN. INOUYE: Thank you.

Senator Brownback.

SEN. SAM BROWNBACK (R-KS): Thank you very much, Senator Inouye. I think it's been an excellent panel and a good discussion here. Just maybe to put a real time issue on it, the industry people I've been talking to -- within the next 18 to 24 months, we're going to have extensive amounts, apparently, of dropped calls, incomplete calls, problems that are going to be taking place because of a lack of spectrum at some of our most critical urban markets. So, we've got a tight timeframe that we're talking about here. And I think what Senator Wyden and others are pointing out, and the chairman, Ted and Conrad are, we need to start working on the constructive solutions and to press forward.

Dr. Wells, I was concerned, you know, one of your points at the end, and I'm sorry I missed the first part of your testimony. But at the end, you were saying, well, we're waiting for the win-win solution to come to us and for people to approach us about this. We want to do a win-win solution, but we don't see it. It sounded as if, in your presentation, that you're waiting for it to be presented to you. And I'm really hopeful that what you're doing is searching internally to try to find what that is. You know best your system and you know the national security needs, and you also know the pressures.

If you've got people this supportive of the armed services pressing to -- we need to get some of this spectrum out in the private sector and it's not coming forth, that's just going to build more and more pressure, and then there will be legislative solutions being put forward that really ought to come from you internally, because that's where we would feel most confident and comfortable. But if the calls start getting dropped, if we're not having sufficient spectrum to meet the demands of the public, and it appears that there are some potential solutions that (await?) internally, then the legislative solutions start coming forward.

So I would just plead with you and press you to work internally to develop those win-win situations and to present those as options exterior-wise in these negotiations. And we don't have a lot of time to get this done. If you'd care to respond to either the timeframe or to working some internally, I would appreciate your --

MR. WELLS: Let me assure you, Senator, that we are working aggressively internally on searching for these win-win options.

As I said in testimony last week, the department is literally eager to work with my colleagues at NTIA and FCC, the private sector and the Congress to find a way ahead in this, because this is not just a matter of, sort of, national security. The overall economic health of the country is a matter of national security as well, and we recognize the importance of 3G -- the importance of wireless services to the future of that economic.

So, we are looking to be not just hoarders of the spectrum we have. We are looking at being efficient users of what we need, but making sure at the same time that the national security functions we need to perform are performed. That's going to cause us to find ways to reach out. We'll be meeting here in the next few days to weeks with NTIA and FCC to find ways to put on the table all of the options, which may include some of our options as well, of ways ahead. And so we understand this is not a game of just holding pat with the cards we have and hoping it goes away. We know that's not going to happen. We know we need a national solution that weighs all the factors and we're going to play on that.

SEN. BROWNBACK: Good. When we start getting notings of phone calls dropped, incomplete calls, there's going to be a lot of pressure building here, and that time is just not -- is not that far away from us.

MR. WELLS: If I could just make one reference to. One of the things that operates in this band, in terms of the control frequencies, is the global positioning system, which many people don't think of as a military system, but in fact grew out of the military. That's becoming such a critical infrastructure for, you know, for the nation as a whole, that as we find a way ahead to migrate these satellites -- I mean, that's an example of something that really is dual use. It's not just military. But we have to make sure that those frequencies are protected for the civil community as well, and making sure that's factored into our considerations.

SEN. BROWNBACK: Well, I appreciate you being here and hearing this message. And from some of your strongest supporters, which I'm a strong supporter of the military as well, we've got to find these solutions if at all possible, and we need to do so really within the next several months if we're going to get this to happen in a sequence such that we don't bump up against a lot of problems in some of our major markets in this country. Thank you, Mr. Chairman.

SEN. INOUYE: Thank you very much.

Senator Stevens.

SEN. STEVENS: Gentlemen, I've been thinking about introducing legislation to create a fund into which monies would be paid from those who would lease spectrum from the Department of Defense, or from those in the private sector who have spectrum -- accelerate the approval of that, Mr. Knapp, in the private sector so that we could have some joint use or multiple use of some of the spectrum that's out there now, particularly the spectrum that DOD might not currently need -- some sort of a lease with -- sublease with an instant recall concept for Defense spectrum. Something that would meet what (Senator Brownfield's ?) talking about right now -- the absolute prediction of shortage. We had this one meeting -- this committee did -- indicated we're really falling behind internationally now because of the shortage of spectrum.

If we did that so that the Department of Defense could use that money to proceed to digitize and upgrade your communication, and so the FCC could use the money to find ways to try to improve the sharing of spectrum, what do you think about that? Is that a possibility -- that if we could give you the money without waiting for Congress to approve it, put it into a fund? You can use it to digitize and modernize, Dr. Wells. And you could use, Mr. Knapp, the monies, to find some way to try to bring about more efficient use of the spectrum allocated to the private sector now. Is that feasible?

MR. KNAPP: Senator, as I testified earlier, to the extent we can bring market mechanisms to bear on spectrum management, whether it's the government spectrum or the private sector, that probably is a good thing to look at, and we'd be happy to work with you on it.

SEN. STEVENS: Currently, if I had spectrum, I could not sublease it without your approval, right?

MR. KNAPP: In certain cases, that's correct. And that was why we initiated a proceeding on what we called "secondary markets," to try and remove obstacles to that, but still maintain the protections to control interference, for example.

SEN. STEVENS: And if that happened right now, you wouldn't keep the money for modernization, would you? It would go to the general fund.

MR. KNAPP: That's correct.

SEN. STEVENS: And Dr. Wells, if we could arrange that you got the money for temporary leasing, would that be any economic incentive?

MR. WELLS: Senator, let me take that for the record. That sends like a very interesting -- you're saying rather than transfer the spectrum, to find a secondary market and lease it. I honestly have not considered that. Let me take it for the record and I'll get back to you.

SEN. STEVENS: Thank you very much. Thank you, Mr. Chairman.

SEN. INOUYE: I have just one more question. Industry has indicated that they need DOD's spectrum if we are to maintain our world leadership role in 3G. DOD says it needs its spectrum to carry out its mission. ITU now has set aside DOD's spectrum for worldwide use in 3G, and we have no idea whether that worldwide use would interfere with DOD activities. Where do we go from here?

MR. WELLS: Senator, if I may, the interference with -- the sort of spectrum interference with DOD operations overseas has been a fact of life for many years, whether in this band or other bands. It's one of the reasons why we've spent a lot of time negotiating host nation agreements, and in some cases, in combat operations, you just work your way through it. I don't think we're ever going to get to a situation where you can sort of legislate, or negotiate, or have ITU designate a band that's going to be for worldwide military ops and find it free of interference.

So, I really don't see this as much of a change from where we've been for a long period of time. Yes, it's true that 1755 has been one of the bands -- to 1850 -- actually 1710 to 1850 -- is one of the bands designated by the ITU, but it's one of only several. I mean, there are several other bands that could be used. And so I think as we look at the possibilities for 3G, we shouldn't just get focused in on that one because interference occurs everywhere and we ought to take advantage of the full opportunities here in the U.S. for this band -- for this 3G service.

SEN. INOUYE: Is the use of the DOD band necessary if we are to maintain our leadership role in the world on 3G activities, Mr. Knapp and Mr. Hatch?

MR. KNAPP: I would suggest that there's still more work to be done in looking at -- we've looked at some options already. And I think what you've heard and will hear from the other parties is that there's still more work that we can do in looking at making more efficient use of the spectrum. So, with more work, I think we probably can come up with a solution here.

SEN. INOUYE: Mr. Hatch?

MR. HATCH: Thank you, Mr. Chairman. Yes, I would agree with Mr. Knapp. There are a number of options that have been put on the table and discussed, both in our report, the DOD report, the FCC NPRM (ph). The private sector has made some additional inputs and proposals for additional spectrum that could be made available. I think it would be prudent to sit down now and look at all of these options and see what options would be the best options to pursue to come up with the final answer for spectrum.

SEN. INOUYE: Thank you very much. Further questions? Mr. Brownback? Then, gentlemen, I thank you very much. You've been very patient and your responses have been clear, but at times aggravating. (Laughter.

) Where do we go from here? Thank you very much.

Our next panel, Mr. Denny Strigl, CEO of Verizon Wireless; Mr. Carroll D. McHenry, CEO of Nucentrix Broadband Networks of Texas; Mr. Mark Kelley, Chief Technology Officer, Leap Wireless of San Diego; Mr. Thomas E. Wheeler, President and CEO of Cellular Telecommunications & Internet Association; and Mr. Martin Cooper, Chairman and CEO, Co- Founder, ArrayComm, Incorporated of San Jose.

Gentlemen, I thank you for your patience in waiting for us. May I now recognize the CEO of Verizon Wireless, Mr. Strigl?

MR. DENNY STRIGL: Thank you, Mr. Chairman, and good afternoon. Mr. Chairman and members of the committee, thank you for inviting me to appear before you today. The allocation of adequate spectrum to support the continued growth of the wireless industry and the development of 3G services is the most important and timely issue facing my company. It is also vital, I believe, to the U.S. economy. Last year, the President's Council of Economic Advisers concluded that 3G services would provide more than $100 billion in annual consumer benefits, and urged the government to promptly allocate sufficient spectrum for 3G.

I am grateful to this committee for its interest and support on this issue, but I must underscore that we need prompt action. Verizon Wireless has one of the most advanced mobile networks in the industry, and we make every effort to efficiently use the spectrum we have to meet the needs of our customers. However, despite our deployment of the most spectrally efficient technologies available, the enormous growth in mobile voice and narrow band data services, and the expected growth of advanced mobile services, such as high speed data, will ultimately constrain our ability to meet future customer demand without additional spectrum.

Some people would suggest that we have no need for additional spectrum and that using our existing spectrum more efficiently will solve the problem. With all due respect, I think that those arguments are self-serving. I don't believe anyone could know as well as we do the needs of our customers and the demands on our network. And particularly someone would not know this with many fewer customers or much lower demand levels.

I come before you today to urge you to act quickly to make additional spectrum available to meet the needs of our customers, while bringing critical benefits to the American economy. The following actions, I believe, are needed. First, the Commerce Department and the FCC must allocate 200 megahertz of additional spectrum to support the continued growth of wireless services. The 1710 to 1850 megahertz band is a good start, and I believe that it was identified at the 2000 World Radio Conference as a primary candidate for 3G services, and is the best choice for obtaining globally harmonized spectrum.

Second, the government and private industry must work together to develop an implementation plan for how and when the spectrum will be cleared for existing users, and when it will be auctioned. Third, a workable process must be established for reimbursing federal government users for relocation to other spectrum. To this end, I urge Congress to pass legislation that would compensate the Department of Defense and other federal users directly through auction proceeds. This would guarantee that compensation funds are available. The availability of funds for relocation, as well as modernization of federal communications systems, creates a win-win approach that is an important step forward in making spectrum available for 3G.

Mr. Chairman, I cannot overstate the importance of spectrum to my company and to the wireless industry. Earlier this year, my company bid nearly $9 billion for spectrum in Auction 35, which raised $17 billion for the U.S. Treasury. This spectrum is necessary to meet the continued demand for mobile voice, and to begin deployment of 3G services. Ultimately, this spectrum is stuck in legal limbo, with likelihood of protracted legal battles. Last week, Verizon Wireless joined with four other high bidders from that auction, namely Alaska Native Wireless, Dobson Communications, Salmon PCS, and VoiceStream Wireless, in a letter urging the commission, the Department of Justice and the Office of Management and Budget to achieve an immediate settlement of the NextWave case that would preserve the results of the auction.

Congress should do all it can to encourage the parties to settle. This is the best way to ensure that the valuable mobile licenses purchased at auction are put into the hands of the carriers who can deploy immediately to serve our customers. The United States it he world leader in the development and deployment of advanced wireless technology. However, we are falling behind other nations in the allocation of spectrum that is necessary to support the development of the next generation of wireless technology.

I urge the committee to take every action you can to make spectrum available to the wireless industry, so that carriers can deploy 3G services. Thank you again for your continued interest, and for your leadership on wireless policy issues.

SEN. INOUYE: Thank you very much, Mr. Strigl.

Mr. McHenry.

MR. CARROLL MCHENRY: Good afternoon, Mr. Chairman and members of the subcommittee. Thank you for holding this hearing and inviting me here. I'm Carroll McHenry, Chairman and Chief Executive Office of Nucentrix Broadband Networks, based in Carrollton, Texas. Nucentrix is a last mile provider of high speed wireless Internet and other broadband services, over MDS and ITFS spectrum. We're the third largest holder of such spectrum in the U.S., behind Sprint and WorldCom, covering millions of homes in small towns and rural communities in Texas, Oklahoma, Kansas, Illinois and several other states.

We're licensed and posed to deploy broadband services in these markets. Bringing broadband to over 90 such smaller towns and rural America will be our only business. I'm here not only on behalf of Nucentrix, but also on behalf of many other commercial operators and thousands of K through 12 and higher education institutions, who have joined forces to deploy broadband commercial and educational services. I'm also here to tell you that the deployment of high speed Internet in our markets has been seriously delayed as a result of the government's efforts to find additional spectrum for 3G.

The cloud of uncertainty over our spectrum has shut down access to capital markets. As a result, we are currently able to finance the build out of our licensed networks. While we agree that potential 3G mobile services are very important, so are fixed wireless broadband services, especially in the markets that we serve. Today, I ask you to help end this uncertainty by urging the FCC to remove our spectrum from further consideration for 3G. The FCC staff has concluded that MDS and ITFS are not viable for 3G. In fact, the record shows there are more appropriate spectrum bands for 3G. There's no good reason to delay a decision regarding our spectrum while the FCC explores more desirable options for 3G.

If our spectrum is held hostage to further proceedings, our rural broadband deployment will be delayed, and may be foreclosed altogether. Fixed broadband wireless is vital to rural America. Five years after the Telecommunications Act of 1996, broadband in rural America remains extremely limited. For example, in my home state of Texas, the PUC concluded in a recent report that the ILECs have largely ignored rural subscribers. There are no CLECs providing DSL to rural Texas. And only five percent of the rural counties in Texas have cable modem service. In most of Nucentrix's markets, like Midland, Texas; Manhattan, Kansas; and Peoria, Illinois, and the rural areas surrounding these towns, businesses and consumers have few, if any, broadband choices. In these places, our fixed wireless service may be the only broadband option available.

Additionally, in markets that actually have DSL and cable modems, we and other MDS companies may provide the only competitive broadband alternative to the ILEC and cable duopoly. Just recently, several large ILECs and cable modem providers announced price increases for their broadband services. Without an alternative, the duopoly has no incentive to lower prices.

Regarding spectrum management, it is important to remember that Nucentrix and other MDS operators purchased many of our licenses at auction in 1996. The FCC encouraged additional investment with a rulemaking that authorized the bands for digital two-way services. We're now faced with the prospect of losing the licenses purchased at auction only months after receiving authority for two-way broadband services. If winning bidders cannot be assured that the government will honor its commitments and allow them to operate their licenses, integrity of the auction process would be undermined.

The MDS and ITFS industry has invested billions of dollars in acquiring licenses, developing technology and preparing to deploy broadband wireless networks. Nothing in the FCC's 3G record credibly supports reallocation of our bands. 3G carriers prefer other spectrum, and the FCC is exploring those other alternatives.

Mr. Chairman, time is of the essence. The bottom line is that Nucentrix needs capital to bring broadband services to rural America. The uncertainty created by the 3G spectrum search has shut down investment. Please help us to get moving again for rural America. Urge the FCC to take MDS and ITFS off the table now. Thank you very much.

SEN. INOUYE: Thank you. Mr. Kelley.

MR. MARK KELLEY: Thank you, Mr. Chairman, members of the committee, for the opportunity to speak here today before you. My name is Mark Kelley. I'm the chief technical officer of Leap Wireless in San Diego. All of you are familiar with AT&T, Verizon, Cingular and other large wireless carriers. You're probably also familiar with large trade organizations, such as the CTIA. But, most likely, you're not familiar with Leap Wireless. Briefly, we provide unlimited local mobile phone use for a very low price. Our customers' average bill is about half of the national average for mobile phone bills. However, our subscribers use their Cricket mobile phones far more on average than other wireless carriers -- about 1,100 minutes per month of use versus an average of around 300 nationwide.

The average bill for our subscribers is $35 a month. We offer a $29.95 unlimited use plan. Clearly, we're more of a landline replacement than a classic mobile phone company. We provide this service using only 10 to 15 megahertz of spectrum, and we're deploying 3G this year and next. I have a few simple messages today. The first is, as Mr. Strigl said, the U.S. is a world leader in 3G technology. An area we're not ahead in is adoption. Adoption is behind other areas in the world. One of the reasons for that, of course, is we have a fantastic landline network. Another reason is there's not enough opportunities for companies like Leap to innovate and offer plans like we do.

Innovation was a key for leap. It could be a key to others. What we do is what several members spoke of and the chairman, in the discussion prior to this, which was about efficient use of spectrum. We're using incredibly efficient spectrum technology. It's a very scarce public resource. Only about 2,000 megahertz are available. We believe that all carriers should be required to use spectrum as efficiently as we do. As I said, we're going to deploy 3G this year, and the technology we're using, CDMA 2000, has a couple of components to it. One component is called 1XRTT. 1XRTT gives you 3G-like data speeds for fully mobile environments. The next component of it is called 1XEV, data optimized. That component can provide over two megabits a second in fixed environments and some mobile environments. We're going to deploy that early next year.

When it comes to evolving technology and growing, the best way to do it is a way it's truly evolutionary -- kind of the way color television was using the same spectrum as black and white, but people didn't have to go out, if they couldn't afford to, and get a new TV to watch the same channels. It would simply show up in black and white. People who could afford a color TV could see it in color. What we're doing with 3G, we'll use the same spectrum we're using today for 2G. For people who don't have new handsets, they won't have the new services. For people who can afford the new ones, the new services will become available to them. And once again, to reiterate, we're doing that with 10 to 15 megahertz of spectrum that we own today.

Releasing more spectrum for commercial use does make sense when it serves the national interest. It does that when efficient use is made of all the spectrum -- all the spectrum in all the markets. One way that the FCC has encouraged people to use efficient spectrum is via a mechanism called a spectrum cap. The spectrum cap only allows any single carrier to own 45 megahertz in an urban market and 55 in a rural market. That's a lot of spectrum. Keeping that cap will protect consumers. In the spectrum that we're using today, we'll be able to allow 3G and accommodate big and small markets. It would take more spectrum to accommodate higher density population markets.

So, our final message is we believe you can do 3G in the spectrum that's available today, provided everyone is using all their spectrum efficiently, and that every hertz of spectrum is looked at that's available right now for commercial use, and it's ensured that that's used efficiently. We don't believe there is as much of a crisis to get new spectrum in the hands of carriers today, who already have a lot of spectrum, in order to do 3G. Thank you.

SEN. INOUYE: Thank you very much.

Mr. Wheeler.

MR. THOMAS WHEELER: Thank you very much, Mr. Chairman. There is a spectrum shortage in this country. Technology is part of the solution, but it is not all of the solution. And let me say at the outset, in response to the previous panel -- let me stipulate clearly, we all are Americans first. We all recognize that we have the best military in the world and we want to keep it that way. The challenge that we face is both for the economy and for the military in the long term, as well as the short term. And let me show you a couple of examples.

This is an overview of where we stand as a nation today in terms of our spectrum availability compared to our international competitors. And as you can see, we are significantly lagging behind where the other countries -- who are developing services, developing technologies and expanding their reach -- are in terms of their base. Now the question becomes, where do we go from here. Unfortunately, the story gets worse. Let's look at the next chart for a second here. You've been talking about the ITU, Mr. Chairman, and their forecasts. The ITU says that for this country there is a need for 390 megahertz to deliver both voice and data. Now, that's less than they say is needed in Europe, Asia and some other places because of our geography and some of these other factors.

But here's the real startling fact in that statistic. See this dot right here? That was the penetration that the ITU assumed would drive the spectrum need. The yellow line, however, is the penetration expectations and forecasts of the market analysts. So the problem is, that what this is saying is that even if 200 megahertz of spectrum fell into our lap today, the assumption upon which the voice component alone is based, says that that may be insufficient. Now, this shortage hits carriers differently. You've just heard Mr. Kelley and Mr. Strigl, who, by the way, use the same CDMA technology in their systems. One says "I need new spectrum," and the other says "No," he doesn't.

But the important thing is that the time is running out and we can't have a technological debate or a using policy to advantage one competitor over another. While we are debating, problems are happening around the world. Let's take a look at this map, for instance. The green represents those countries, which either currently have, plan or have indicated that they intend to offer wireless services in the 1710 to 1850 megahertz. Now you heard Dr. Wells say that China was going to 2400 megahertz as well, yet it's green on this chart. The answer is yes to both. China has indicated they're using the 1700 to 1850 band, as well as looking at using the other band as well.

But the point of the matter is that the United States, of all of the major countries of the world, is the entity that does not have spectrum that is harmonized with the rest of the world. Now, that has an impact on consumers, because it means that the United States doesn't participate in the scope and scale economies that everybody else -- all the other consumers and their companies in those other countries participate in. It means higher rates for equipment. It means lower, slower development and introduction of new products. I mean, I am sure you are as sick as I am of the articles that say why is it the United States is behind the rest of the world in terms of wireless services. Spectrum is one of the issues and the lack of harmonized spectrum is the other issue.

But the other part is this has a huge impact on the military, because we have a forward deployed military. And when they go to these green countries, what do they find? This is what the Defense Department, in their report on spectrum said, and they said, that they have already found that when they deploy in Europe that there is interference coming from wireless usage, because those bands have been assigned by the European governments to wireless. In Korea, Team Spirit, the operation Dr. Wells talked about, had to knock off of the air some of the Korean cellular network in order to be able to operate American radio networks.

And it is not going to get better. If you flip this over -- this is what the growth looks like of wireless subscribers around the world. And while there is a problem today, there is going to be a huge problem tomorrow, as you have hundreds of millions of consumers operating in the spectrum that our Defense Department is going to deploy in. This is a problem that's recognized by the Defense Department. Here is a report that was published recently -- November, I believe -- by the Defense Science Board, which as you know, is the think tank of the Defense Department. Look what they said. This may be too fine to read from up there, but let me just highlight here. "The current defensive nature of DOD's spectrum policy and its reluctance to consider alternative spectrum concepts, including sharing with non-Defense users, leaves the military vulnerable to losing mission critical spectrum access. These important changes are not well understood by DOD's leadership."

And here is the most incredible sentence right here. "Other nations are aggressively asserting their sovereign rights to manage their own spectrum, complicating OCONUS -- outside the continental United States -- deployment." This is the Defense Department's own think tank saying that the lack of harmonized spectrum is a problem for our soldiers, sailors and airmen. That's the current reality. The current reality in the industry is that the lack of harmonized spectrum means that our consumers and our international competitiveness is going to get worse. Our military situation's getting worse. Our competitiveness and our consumer situation is getting worse. There has to be a common solution here. There's got to be a fix to this, because we're both on the short end. There has to be a win-win.

And I would suggest that I was really heartened by Dr. Wells' testimony, and by some of the material that DOD has prepared in their own spectrum report, because they suggest themselves that there are solutions. This is a reprint from the Defense Department's own spectrum report. I want to call your attention to this section right here. Band vacation may be feasible under the following circumstances. Let's look at these. Number one requires provision of comparable spectrum. We agree. There needs to be comparable spectrum. There can be comparable spectrum. Number two requires timely cost reimbursement. We agree. Senator Stevens talked about the value of the spectrum that would be auctioned off. We agree that ought to go to the Defense Department directly -- do not pass go.

Number three, requires respect for DOD timelines to vacate. We agree with that. We're not here asking you Senators for 200 megahertz just to land tomorrow, but a plan that says how do we work through that with the Defense Department. We think that these dates that they put in are a little tardy, but that a plan can work through this. And in that regard, again, I want to focus on Dr. Wells' comment. He said several times there were solutions. Let's emphasize that the glass is half full, that there are solutions. And to close, let me just show you a chart that reflects some of those solutions, as identified by the Defense Department. In their spectrum report, they went through and they said, "Okay. Here are all the current bands that we're using. If we have to move, where could we move?" And they identified these bands.

Now I want to be really clear and say that this is not like picking up and changing the place you park your car -- that there is regulatory work that needs to be done; there is coordination that needs to be done; there is clearing that needs to be done. But they've identified where it can go. And what the industry is saying is that with this kind of a migratory plan that will solve the Defense Department's international interference problems, that will create a capacity for domestic wireless services and that will generate revenue to fund these movements of the DOD and to make sure that the communications, instead of being the tail on the dog in military spending, is leading the charge, that is possible and that's the kind of win-win situation that we believe we can all work forward together. It's not going to be easy. But it is possible if we will all bow our backs.

Thank you, sir.

SEN. INOUYE: I thank you very much.

Mr. Cooper.

MR. MARTIN COOPER: Thank you, Mr. Chairman and members of the committee. It is really a privilege for me to be here before you today. And I am especially delighted to share the fact that I've spent a career of almost 50 years working on spectral efficiency. And having a distinguished group like this looking at this matter is a source of great pleasure to me. It's also a great pleasure to be the last on this agenda, so that I can explain to you what my distinguished colleagues really meant to say. (Laughter.)

Let me start by first urging the committee to ignore the technical gobbledy-gook that the wireless industry -- myself included -- have deluged you with in the past years. I want to focus on what your real agenda is. That agenda is the granting of rights to a national, non-renewable treasure -- the radio frequency spectrum. You have the obligation to see that all the users of the spectrum, collectively, serve the public -- all the public. And any result in the way that you allocate that spectrum that excludes important constituencies of the public is just simply wrong.

When we created cellular, some 30 years ago, what we envisioned was a personal, portable telephone service that unshackled all people from the wires that tied them to their homes, to their workplaces. We knew that wireless could deliver high-quality speech at low cost, with good reliability to all people. Further, we promised the FCC -- and I was there and I remember this -- that cellular technology was capable of continuously improving spectral efficiency. Allocate 40 megahertz to us -- we said -- and we will grow the service indefinitely and we'll never come back for more.

Well, we did come back for more. That initial 40 megahertz has grown to 170 megahertz. And here we are, asking for more. Today, if the industry -- if the wireless industry -- proposed to serve all of the personal traffic in the United States -- that was our dream. People on the move really don't want to talk on wired telephones. They want to talk on personal phones. And if you put all of that traffic on wireless service, using today's technology, you would use all of the existing spectrum. You'd use 2000 megahertz of spectrum. And that allows no room for further growth. And it allows no room for all of the various classes of data services that will consume many times more spectrum than the voice today.

So that's the real problem of the committee. If you rely on today's technology, the need is not just for another 100 or 200 megahertz. The demand is for another 2000 or 4000 megahertz. And that spectrum simply does not exist. The cellular vision that we had 30 years ago remains incomplete today. Cellular serves some segments of the population very effectively; others poorly; some, not at all.

So what is the answer? The only answer is new technology that not only improves but multiplies the spectrum capacity. Technology has come to the rescue in the past. Properly stimulated -- properly stimulated -- it will come through again. And that stimulation is the crucial role of this committee, of the Congress, of the FCC, of the Department of Commerce.

I want to give you some examples because I was fortunate enough to be involved in three successful government-industry collaborations in the past. And the process really does work. In each case -- in each of these three cases -- the FCC said that new spectrum would be made available to industry, but only if the industry could provide new ways of using that spectrum -- new, spectrally efficient ways of doing it. The industry responded. In the 1960s, paging systems were developed that could serve 100,000 subscribers in the same amount of spectrum that previously only hundreds of subscribers could be served.

In the '70s, the special mobile radio service was created -- SMRS. The concept of "trunking" was introduced into land mobile and that multiplied the spectrum capability for land mobile by in excess of 10 times. And then, in the 1980s, cellular technology brought public switch service to thousands of subscribers on every radio channel that previously had only served hundreds of subscribers. And in every case, it was technology that came to the rescue. In every case, there was a magic bullet. And who stimulated the magic bullets? The vision of bodies like the FCC and this subcommittee.

And here we are again. I suggest that cellular technology needs to be refreshed. The new technologies are the basis of that refreshment. And these new technologies are ready and waiting. And 3G alone does not do that. 3G itself is not a new, spectrally efficient technology.

And there is a magic bullet. And that magic bullet -- it was referred to by the gentleman from the Department of Defense, Dr. Wells -- is the adaptive smart antenna. Adaptive smart antenna array technology. Adaptive smart antenna technology has proved -- this is not theoretical. It's been proved to multiply the use of the spectrum by not just a few times, not just by percentages, but by tens of times. Now, it's been proved by the deployment of some 90,000 base stations throughout the world today, mostly in Southeast Asia and the Middle East. And the nature of that technology was -- had its source, ironically enough, in our own Defense Department, years and years ago. Properly stimulated by the continuing oversight of Congress and the FCC, this kind of technology cannot only resolve the spectrum challenge, but it can also get American technology back into the leadership role that it deserves.

So I want to close my remarks with my vision of personal wireless future. It's a future where technology becomes invisible, where the consumer reigns, where the citizen reigns, where consumers of all kinds -- from teenagers to seniors, from city folks to small-towners, from techie early adopters to a heart patient whose life is saved by one burst of data, where all of these people and our defense forces have access to all of the radio spectrum. Technology can make that happen. You senators have the power to make that real. Take your time and do it right.

Thank you very much.

SEN. INOUYE: Thank you very much, Mr. Cooper.

Mr. Wheeler.

MR. WHEELER: Yes, sir?

SEN. INOUYE: On one of your charts, you showed a lot of green, a little red. And you spoke of the lack of harmonizing. Now, did all the countries covered in green come to some agreement in the use of certain technologies so that they became harmonized?

MR. WHEELER: No, there's a difference between the issue of technology harmonization and spectrum harmonization. What they have all agreed, by making individual decisions, is to harmonize the spectrum. There are different kinds of technologies that are sometimes used within that spectrum.

SEN. INOUYE: So it's not a conspiracy against us?

MR. WHEELER: Senator, you know, there are some who have said -- let me put it that way, okay? There are some who have suggested that knowing that that is red and that's where the Defense Department sits domestically might be a great competitive place to go in the rest of the world and watch and waste us on our own petard, if you will. I've not suggested that. I'm just reporting what others have suggested, in response.

SEN. INOUYE: Gentlemen, you have sat through and listened to the testimony of the first panel. And I concluded from listening to them that they wanted more time. And I think most of you said time is of the essence. We must act promptly. Do you have any thoughts on the testimony of the three witnesses?

MR. STRIGL: Mr. Chairman, if I may?

SEN. INOUYE: Yes.

MR. STRIGL: First, sir, the time is clearly of the essence. Senator Brownback, a few minutes ago, talked about the, what I would call the spectrum exhaust in some of our major cities. The comments that the senator made are quite true. In major cities across the United States, at current course and speed, considering the growth of the wireless customers, the growth in usage that we have seen, we will see an exhaust in major cities like New York and Los Angeles, within the next 18 to 24 months. Included in that estimate is a move to more efficient technology. So I think it is very important that we act now, sir.

MR. MCHENRY: If I might? While we don't take a position on how rapidly the current cellular or mobile wireless carriers may need spectrum, and that varies from market to market and the services that are offered, I would echo that time is absolutely of the essence and even more so to Nucentrix. As I mentioned in my oral testimony, the ability to finance our company and rollout the broadband services has basically been held hostage to the proceeding that began in the fourth quarter of last year. And so, I just couldn't emphasize enough that the studies have been made, the interim reports have been made, the final reports have been made and that, while there may be some need for a smaller amount of time or some additional time to study the issues that Mr. Wheeler has described on developing a detailed plan, that process means certain delay and possible fatal delay to the rollout of broadband services in rural America.

MR. WHEELER: Could I piggyback on that, Mr. Chairman? Let me just repeat one other point, and that is that we recognize that the only logical way to deal with this challenge is over time. And, as I said in my testimony, nobody is asking to have 200 megahertz drop in their laps next Thursday. But we need to start a process with a plan -- a plan that helps DOD and other government agencies understand what they need to be planning for, a plan that tells Mr. Strigl and Mr. Kelley and others what they need to be thinking about. And then we can go at it, in pieces, over time.

And the beauty of going at it in pieces over time is -- to Senator Stevens' point a minute ago -- it also happens to then fund the next piece. Because, if you set up a trust fund that is funded by the first auction and that trust fund can only be used to clear the next piece of spectrum that will be auctioned -- and that means not only moving to new areas, but having the new equipment and everything that goes with it -- then an amazing thing has happened. Two things have happened. Number one, you have speeded up the move because you have had a planned process. And number two, you have created an incentive for the government because spectrum that has been cleared, which is what this trust fund would pay for, is more valuable than spectrum that you have to buy and then wait to have cleared. Time value of money issue.

And so, yes, there is a process that we can go through that will take time. But it has to start. There needs to be some pump priming, if you will. And that pump priming can be a much smaller piece of spectrum. But the pump's got to get primed.

MR. COOPER: Allow me to address your comment -- or your question -- about a response to the people from the Department of Defense because I was quite startled to hear that they had allocated some $50 million to look at more spectrally efficient techniques for defense. My company is looking at one very narrow area. We're looking at how to apply the smart antenna technology I told you about to cellular systems like 3G and Internet access systems. And we have raised something in excess of $140 million of venture capital -- and, by the way, spent almost all of it -- just for this one narrow area. It's clear that the comment that one of the committee members made is correct, that people are not -- I think you did, Senator Stevens -- that these people are not looking at this as a trillion dollar problem because if you've got a trillion dollar problem, which I'm certain this is, then you spend a lot more than $50 million on it.

With regard to the issue of the timeliness of 3G, first of all, nobody really knows what 3G is. 3G has become one of the gobbledy- gook words. But there are at least four different versions of 3G extant around the world today. Some of them share different frequency bands. 3G really is a collection of future technologies. The 3G systems that have already been started to be introduced are so complex that there are none in true operation today. NTT, who ostensibly is the world leader, was supposed to start service in July. They delayed their service until October. And now they're talking about next June. 3G is not the solution to Mr. Strigl's customers for the next two or three years. It's a long, long-range future

The only thing that's going to help -- and by the way, I know that Mr. Strigl is already working in this area -- is to use spectrally efficient techniques that apply to today's spectrum and that take care of today's customers.

SEN. INOUYE: Mr. Kelley.

MR. KELLEY: Thank you, Mr. Chairman. I would echo completely Mr. Cooper's comments with regard to efficient use of spectrum. And we've heard many people refer to that here today. It's critically important.

But there are so -- with regard to time, how quickly we have to move, how urgent it actually is and particularly in regard to the comment Mr. Cooper just made about the leaders outside this country who made big announcements and spent -- in Europe, anyway -- close to $100 billion on licenses, those technologies have not yet been deployed. In fact, they've been delayed several times. So I would be hesitant to suggest that we should rush into, in any way, doing something similar so that technologies are rushed out to deployment before they're ready, before we know they really work and it really is the best use of spectrum, number one.

The second thing is, do we really know how every hertz of spectrum is being used in this precious mobile band that's about 2000 megahertz wide, what it's being used for in every city? A large amount of the spectrum that's been allocated in other parts of the world is really not being used at all today. We understand, in a lot of cities, even the one that we're in right now where our company is based, we're not able to offer service. There is no spectrum available there for us. But there is the same 180 megahertz available there and probably 120 megahertz of it is actually being actively used -- I don't know how much of that efficiently -- and that's an estimate.

So there is just so many unknowns. And the time definitely is ripe to examine the issue because it is very important. It is very timely. But I think it's worthwhile taking time, looking at what protects consumers -- in fact, all Americans -- the most effectively and what's in the highest national interest, in terms of use of the spectrum.

SEN. INOUYE: It would appear from the testimony that DOD spectrum is the key to what we are discussing today. DOD has indicated that it's not quite ready. GAO, a most respective agency, as far as the Congress is concerned; they set our agenda -- has indicated that they are not quite ready to report. What do you suggest we do, this subcommittee?

MR. WHEELER: Mr. Chairman, I think there is two things that we have to look to you for leadership on. The first is that there need to be a spectrum policy in this country. One of the reasons that we're in this hole is that there is no spectrum policy. Our spectrum policy has been budget policy. I mean, how much spectrum do we have to auction off to raise how much money? And it is: where can we grab it from? We don't have a plan. We don't have a structure for getting to that plan. And so, that's the first thing. And that's something that I believe exactly is under the jurisdiction of this committee.

Secondly, we've got to have -- we can't sit around and contemplate the perfect plan at the cost of priming the pump and getting the spectrum process started. So what we would urge this committee to do is to start down both of those paths and to act expeditiously on both, so that we can begin to have a national spectrum plan. And a component of that can be the beginning of the auctioning off of internationally harmonized spectrum for wireless uses.

SEN. INOUYE: Mr. Sprigl.

MR. SPRIGL: Mr. Chairman, if I may? There are a number of things I would encourage the committee to act upon. First is not necessarily only the relocation from DOD spectrum, but an overview, a plan, to identify over time, as Mr. Wheeler had suggested, a total of 200 megahertz. But there are some sub-pieces of this that I think are extremely important that I would encourage the committee to -- the subcommittee to consider. First of all, to set times on how the spectrum is cleared and when the spectrum is auctioned. We have been hurting in this country because we have auctions that keep moving. We have auctions that mention spectrum, with no intentions of clearing it.

And then finally, I think that there is a clear need to identify the mechanism by which those who are relocated, whether it's the Department of Defense or others, how they are reimbursed for that relocation.

SEN. INOUYE: Mr. Kelley.

MR. KELLEY: Thank you, Mr. Chairman. As I was saying a moment ago, my recommendation to the committee would be to do a review of how all the spectrum is being used today by all of the people who have the rights to use it, starting with those of us who are using it for commercial purposes, but including -- to the extent it doesn't compromise security -- the use of the military and the use by education and religious organizations and so forth, to understand how much is being used, where it's being used and finally, how efficiently it's being used today.

SEN. INOUYE: Mr. McHenry.

MR. MCHENRY: I thank you, Mr. Chairman. I would say that the two things that I would recommend that the subcommittee consider would be the fostering of the spectrum management policy -- overall spectrum management policy -- referred to by Mr. Wheeler. And I do suspect that that's going to take some time and further study and fact finding. And secondly is to begin to narrow the choices that are being looked at specifically for 3G because it does have collateral effects on others, as I have described earlier. But to keep all potential 3G bands in play, I think is unreasonable. And I would urge the committee to foster the narrowing of options and the beginning of the process of negotiating and developing that interim plan.

SEN. INOUYE: Mr. Cooper.

MR. COOPER: Mr. Wheeler is right. The Congress has to create a spectrum policy. But I think that spectrum policy, it's been made clear, has got to be a long-range policy because, as powerful as this group is, there is absolutely nothing that the Congress or the FCC can do to make spectrum suddenly appear in anything less than a timeframe of seven to 15 years. The people that addressed this problem from the Department of Defense are sincere. And if, in fact, they were spending the kinds of money that I think and Senator Stevens thinks are appropriate, it would still take a substantial amount of time to bring satellites -- establish new satellite systems and to create these new things.

So my suggestion remains the same. Number one, establish an appropriate policy. Number two, that policy must embrace some criterion for giving spectrum to people; and that is, when you make a spectrum assignment, it ought to be to somebody that knows how to use that spectrum in a better way than it's been used previously.

SEN. INOUYE: Mr. Burns.

SEN. BURNS: Thank you, Mr. Chairman. We've been monkeying along here and pretty close to suppertime. I haven't missed a meal in my life and I don't plan to now. (Laughter.) Interesting comments about the efficiency of the spectrum.

Mr. Strigl, I understand your call for more spectrum and all of that and to facilitate some new stuff and services that you want to offer the American public. But last week, you applied for an extension or a waiver of the timeline on E-911. And we have already granted an extension from March 1 until the first of October of this year. And I think that I speak for all the members of the committee that supporting the communications needs of the country is very vital. And I would also, in the emergency area -- the police, first responders, these kind of rescue personnel -- is one of the most important public duties that the Federal Communications Commission and our committee has. That's one of the high responsibilities. Would you agree with that?

MR. STRIGL: Yes, sir.

SEN. BURNS: I'm saying that even though you're asking for more spectrum, we can't -- and 3G especially -- we can't get you to go ahead and deploy what we think is a vital, vital public service situation. In other words, let's get the conversion done. Why do we need another extension?

MR. STRIGL: Senator Burns, let me please explain that we have spent tens of millions of dollars deploying E-911. We have people who do nothing but focus every working day on E-911. My company has asked for a waiver of months, to be sure that what we are deploying works well and helps save lives. I might point out, sir, that if we look at the number of requests that we have received, not on Phase II, but on Phase I of E-911, number about one-third -- only one-third -- of all of the thousands of PSAPs that exist -- public answering points -- that exist across the country. On Phase II of E-911, which identifies, pinpoints specific location, we have received very few requests across the country. But we will comply. And we are asking for a shift of months, not years.

And I if look, Senator Burns, at the PSAPs within the state of Montana, for example, that have requested service, we have had no requests whatsoever. So what I don't want to have to do is deploy a technology that sends a signal nowhere. There is much more work, sir, that needs to be done. I commit to you that we're doing all we can to put it in place as quickly as we can across the United States.

SEN. BURNS: Well, that sort of distresses me because I just happen to be -- of course, you know, a lot of people, they put off their request until they need it -- (laughing). And I would hate to see that happen. But that does distress me. And I know that we, especially Montana, I just think it's vital for us. I just think, even though our first responder and our emergencies, we stand well nationally. But we still got a lot of space to cover in order to attend to some of those situations.

I am interested in Mr. Kelley's comments today that, really, the demand for more spectrum right now probably is just tepid at best, with using your technology. Why do you think, Mr. Kelley, that other companies that are in your same business is not making the -- getting the efficiency out of their spectrum that you are?

MR. KELLEY: Well, as Mr. Wheeler pointed out, Verizon Wireless, Leap Wireless, Sprint PCS and others are using the same technology -- CDMA, developed here in the U.S. I would say the reason, in our case, we have deployed the newest technology. We're using it incredibly efficiently. One hundred percent of our customers are using the new, efficient technology. Those types of statistics are things that I don't know firsthand of how the other carriers are doing it themselves. Some carriers, who aren't represented here today, have a number of different technologies that are considerably less efficient than the ones that we're using.

And one exception that I would make, that there are some markets that are here in the U.S. -- specifically like New York City, for example, or even here in Washington -- where the population density is similar to that as it is in other countries such as Europe and Asia. And in those kinds of areas, using more spectrum than the 10 or 15 megahertz that we have, where we can serve up to 20 percent of the population with unlimited use, would be a challenge -- in fact, maybe downright impossible. We don't believe, based on our studies, that it would require even more than the spectrum limit of 45 megahertz today or even beyond that. However, we don't have firsthand knowledge of doing that.

SEN. BURNS: Well, it's like I stated a while ago. We have a study that will be completed in November. We're going to be putting together legislation to deal with a spectrum policy, Mr. Wheeler. But we think that we've got to gather a lot more information. And we've got to do our homework -- especially on the committee, with the members, and also with the industry -- before we even start to move any kind of piece of legislation. In other words, bring it together, not only from an inventory standpoint, but our relationship with our international community and have some sort of an idea before we start shaping legislation. Would you have any comments?

I would ask the panel. I would ask the panel. Where do you think this wireless industry will be in 20 years -- in 20 years? What do we do now to realize or to get us where you think we will be in 20 years?

MR. WHEELER: Senator, we're fishing for that ITU chart to put it back up again. No, the one with the yellow. Thank you. Let me -- there is clearly going to be phenomenal growth from where we are. And I remind you that this is just voice services. We haven't even begun to talk about the data services. With all due respect, Mr. Burns, and I know how you have been sensitive to this issue for some time, the issue of study is obviously important because you have to make an informed decision.

SEN. BURNS: Well, that's just the beginning.

MR. WHEELER: Where a study, however, becomes a delay, we are -- as a nation, both our military and private sector -- in trouble. And this is a circumstance where our government went out and negotiated the agreements that identified all of the spectrum. The Defense Department participated in the formulating of that policy. And now we have a situation where the rest of the world has said, "Yep, we'll grab that." And we're studying.

I recognize the importance of being informed. We cannot let that become an excuse for being immobilized, however. And with all due respect to my friends at the Defense Department, I sometimes feel as though, when they say that they have been exploring alternatives, they're doing it with one eye. They're saying, "We will look at alternatives under certain circumstances." And they have given us a roadmap as to how, if we collectively -- and this body has the ability to do that, that kind of collective, broad analysis and affect the rules -- how things can work out. And so hopefully, that work that's been done is the study and we can then move on to get some action because we're falling behind every day.

SEN. BURNS: Mr. Cooper.

MR. COOPER: I'm glad that Tom Wheeler put that chart up there because I'm going to sound like a broken record. If you look at the growth of the cellular subscribers between 2000 and 2010 -- 10 years, because you asked, Senator Burns, about 20 years and I'm going to answer your 20 year question too, but we're talking about 10 times more subscribers in the next nine years.

SEN. BURNS: That's going to get more precipitous.

MR. COOPER: And if you've got 10 times more subscribers and you don't change the technology, you're going to need 10 times more spectrum. And I apologize for just continually repeating that. Just adding little hunks of spectrum is not going to solve the long-range problem. And that's why I think you've got to look at this thing on a truly long-range basis.

But let me answer your question directly because that's what I do. I look at the long-range future because I'm not really quite as accountable if it's 20 -- if you made it 30 years from now, I wouldn't be accountable at all. But 20 years from now, we know technology now that permits you to do true sharing. And that really is what the future is. It's not only the spatial technology I described, where you keep reusing the spectrum over and over again. It's the ability to use these spectrum for lots of different services when those service is needed because the bottom line is the crises that require Defense Department spectrum don't necessarily happen at the same time and the same place as the land mobile spectrum. And you can move that spectrum around.

So it's happening with technology. The ability to process information has increased so enormously and it keeps increasing. We will have the ability in 20 years to manage information in such a way that we can make all the spectrum available to all the services -- I mean defense, public safety, consumers, children playing games -- and make sure that everybody gets the appropriate attention, the appropriate priorities, the appropriate speeds and they all get this at whatever the value that they contribute to society.

And I tell you this is not a pipe dream, that the technologies to do this are already in the minds of the researchers. And some of that technology, as I tried to describe to you earlier, is available today. And as a matter of fact, I'm going to be calling on Mr. Sprigl, I hope over the next month or two, and make some of this technology available to him in the next two to three years. So I didn't want to make a sales call in front of this committee, but -- (laughter) -- but why not? Thank you.

SEN. BURNS: Yes, you can respond, if you like.

MR. MCHENRY: Senator Burns, thank you. I believe you asked what's our vision of telecommunications. I've been in telecommunications now for 21 years; prior to that in information technology. And I was one of the early cellular pioneers. And yes, Mr. Sprigl and I know each other for 15 years or better and Mr. Wheeler. I was in the cellular industry for many years and helped bring cellular to many of the U.S. marketplaces. And what I've observed is that yes, more spectrum has generally been required, primarily to create more competition in the marketplace. And it is competition that's fostered the innovation that's driven the efficiencies in the use of spectrum that has been allocated.

I think it's absolutely clear that more spectrum is not the total solution.

I think it's also absolutely clear, particularly in the larger, denser, urban environments, that more spectrum may be needed, and certainly as a migration place for existing carriers to continue to serve existing customers without degrading that service and have the flexibility to introduce new services, whatever 3G may turn out to be. But I would say that the two keys to the future of what telecommunications will look like, particularly wireless telecommunications, is that it will be any amount of communication that a user desires and is willing to pay for, anywhere, anytime. And that demands broadband and it demands competition to foster innovation. And broadband services are yet to even be defined.

I heard a presentation not long ago by some content providers on the West Coast who said, "Bring me 15 to 20 million broadband subscribers and I'll bring you the content that those people will pay for." And yet, the last mile broadband is the stop. It is the stopper that is preventing broadband from being brought to the U.S. marketplace today. The long haul is there, maybe even more supply in the long haul. But in the wireless piece, in that last mile piece, whether it be mobile, cellular wireless or in fixed wireless, which our company contemplates bringing, broadband is stymied.

And so, what I would say that our vision is, is that anytime, anyplace, any amount of communication. And let the market determine it. Some amount of spectrum may be necessary to get that started. But clearly, an overall spectrum policy is necessary to realize that vision. But maybe more importantly is getting broadband to the marketplace sooner, rather than later, to stimulate innovation and competition.

SEN. BURNS: Yes, sir. Mr. Kelley.

MR. KELLEY: If you go back 20 years -- sometimes the best way to look forward 20 years is to look back 20 years -- if you look back 20 years, 1981, it was just sort of the dawn of 1G. Didn't know it was 1G at the time, but first generation mobile telephony, which were large car phones. Then, 10 years ago, we were embarked on 2G, which was GSM in Europe and PDMA and CDMA digital networks here in North America. Now this year, as we mentioned, we're going to be deploying third generation technology ourselves this year and early next year. When we look ahead, then logically we would say 4G is what we'd have 10 years and 5G, I suppose, 20 years out.

But to Mr. McHenry's point. What does that really mean? What it's really going to mean is multimedia communication, visual communication and the ability to see really anywhere, anytime and communication when you need it and access to information that you need, when you need it. And to Mr. Cooper's point, ideally this is done in a mobile way, in a nomadic way. And that's really what the issue is, is how to manage the spectrum so that you can get these technological advances -- advances that you get through innovation and competition -- that allow those kinds of services to flourish. And all of the businesses that we have today in this country will then be further enabled with all this wireless technology and can flourish and innovate themselves and export the innovations they create.

SEN. BURNS: Thank you, Mr. Chairman.

SEN. INOUYE: Senator Stevens.

SEN. STEVENS: Well, Mr. Chairman, I know better than to stand in the way of Conrad's dinner. (Laughter.) So I won't be long. But Mr. Wheeler, you don't have the chart that sort of mesmerized me there for a minute, and that was the one where our country was in red. You know, I really think, that's slightly misleading to me because in that red country is the greatest freedom with the greatest adaptability of existing technology in the world. And you look at the green, those are primarily the countries that are very, very harsh on individual freedom and harsh on the private sector.

I believe, you know, Conrad didn't ask me for my opinion, but I'll tell you my opinion. Twenty years from now, I think you'll probably be in 40G, Mr. Kelley. I think that the technology is tumbling so fast that spectrum will almost become immaterial once it really takes off and that what we really ought to do is to get out of the way. More than anything else, I think we are delaying this process. And the dollar sign is not the best test, but we believe that the next generation should be more friendly to the consumer and cost less, right? Every generation will do that. I sound like George Gilder now, Mr. Cooper? (Laughter.)

But I do think that it's coming now. And one of the problems I have is that we're delaying this now by our reviews and everything else. And I don't know how to get us out of the way yet. But I think one of the ways is to give another economic incentive to move into another era. And I hope that you'll help us devise that. The answers of just getting the Department of Defense out of the way are not sufficient because that's the worst part of our government to try and move. And necessarily so, because we're still the strongest power in the world and we're not going to disturb that because some of you need to make more bucks. We want you to use those bucks in a way that makes immaterial how much of that spectrum the Department of Defense has in the long run.

But I do think we'll help you in the interim. And I hope the Congress will listen and take some interim steps to just free up some of this. And I hope you would help us work with the FCC. I think the problem is there is delays there too. There are delays because they're complying with some complex laws we wrote that maybe we ought to take a look at those, too. But my feeling right now is that you -- Mr. Kelley, I'm really -- and you'll pardon me, gentlemen -- the way you're using your spectrum is right. You're totally using it.

And I know up our way, we're starting now to use spectrum in the hours when schools and libraries and health facilities don't use it. We're using it for local communications, data delivery, all that. We need to find more ways to use this spectrum in a total manner and on a cooperative manner, so that there isn't just these leash lines and spectrum reserved for a specific use that doesn't take place but once in a while. We've got to have more machine gun use of every dot on the dial, as far as I'm concerned. But I do hope that you'll help us convince some of our colleagues to get moving and do something. Give an incentive to the next era and I think this spectrum problem will help solve itself.

Mr. Chairman, I thank you for holding this hearing. I wish it could be longer.

And Mr. Cooper, I owe you a lunch, all right? Thank you very much.

SEN. INOUYE: Thank you. I too would like to join Senator Stevens in expressing my regrets that more members of the subcommittee could not be present here. I think this hearing was very important. Your suggestion that a new policy should be looked into, because we don't have any policy at this time, is a very important observation.

In that spirit, I would like to keep the record open until the end of August --would that be okay? -- to give us sufficient time so that we can come up with questions we'd like to submit to all of you for your responses. We'd like to spend about a week at least chewing over the testimony because, frankly, to say it's mind boggling is an understatement. But I can assure you that we are intent upon doing something. And we hope that the something we do will be the proper one.

With that, the hearing is adjourned.

END

LOAD-DATE: August 3, 2001