July 23, 2007

The Honorable Edward Markey
Chairman, House Subcommittee on Telecommunications & the Internet
2125 RHOB
Washington, DC 20515

The Honorable Fred Upton
Ranking Member, House Subcommittee on Telecommunications & the Internet
2125 RHOB
Washington, DC 20515

Dear Chairman Markey and Ranking Member Upton:

The Personal Broadband Industry Association respectfully asks you to ensure that the forthcoming FCC auction of the 700 MHz spectrum provides the most ubiquitous and affordable wireless broadband services to the states, cities and rural America. Our proposal should not reduce the projected revenue to the federal budget.

Three weeks ago the Personal Broadband Industry Association (PBIA) was invited to the Broadband Best Practices Summit sponsored by TechNet and the State of California. The summit was held at Cisco’s headquarters in San Jose, CA and was attended by officials from more than 20 states and cities, along with other industry leaders, to discuss best practices and to share lessons learned from their efforts to deploy broadband. The discussions were focused on the need for states and localities to build broadband and wireless broadband infrastructure. All participants shared ideas and a unanimous concern about their needs for more broadband. So it is of concern that while the FCC may be on the verge of opening a sliver of the 700 MHz spectrum auction to some new entrants in a limited capacity, the draft FCC rule fails to address the duly endowed rights of each city and state in this newly deregulated broadband marketplace. As a result, the proposed rules for the 700 MHz auction will not bring true ubiquitous wireless broadband to states, cities and rural America.

The 700 MHz band is the most valuable new spectrum allocation planned for release for wireless broadband, but under the proposed FCC auction rules the majority of its value will be set aside for one of two existing giant telecommunication companies. And the amount that is open to new entrants still won’t be available directly to states and localities to perform the real wireless broadband roll out the U.S. needs at the local level. This spectrum should be a gold rush because it is has the potential to supply more economical and efficient broadband services than any spectrum currently used for wireless phone service, and with new wireless technology, an open 700 MHz wireless broadband service will literally change the business landscape everywhere it is deployed.

As you are all too aware from recent reports, the U.S. ranks 17th in the world for broadband deployment and coverage, and our position is falling. Countries like Japan, Korea and the UK are far ahead. Thankfully, the recent best practices summit illustrated that U.S. cities can effectively partner with private markets to help the U.S. address this critical issue, and many have had success in funding and building such wireless broadband networks in and around their jurisdictions. But to provide the type of ubiquitous wireless speed consumers have become accustomed to when plugging in at home requires new networks utilizing technologies such as smart radios and antennas with high throughput running on this 700 MHz spectrum.

Recently, national broadband service providers argued that to “inspire more innovation” they needed to be de-regulated. As a result, broadband is no longer a regulated marketplace. These same telephone giants know that the 700 MHz spectrum is especially significant for wireless broadband use. So it is not surprising to see their efforts to lobby the FCC and Congress to limit other bidders in the upcoming auction. After all, since the incumbents have now won relief from regulation, why not seek relief from potential competition at the immediate and long term expense of every city and state in the U.S by gobbling up and locking out the most efficient use of this valuable spectrum?

“Why would the incumbents do this?” one may ask. Cable operators and regulated phone companies have spent billions over the last decade on acquiring wireless broadband spectrum, such as 2.3 (WCS), 2.5 (MMDS), BRS and EBS and they have literally sat on it for years without providing significant commercial services. With billions of dollars invested in aging and out-dated infrastructure – including those less efficient wireless technologies and their existing wire lines - it is not in their shareholders’ interest to forsake those investments for new technology, innovation and new spectrum. But it is in their interest to buy and to “warehouse” this spectrum and not maximize its use simply to keep their old infrastructure relevant. The result: no competition, no innovation and higher profits for them. Today most “connected” people move around a city with laptops and multiple communication devices. The argument is not that the existing broadband providers are trying, the argument is that the market has shifted to people, not just houses and buildings and there is a newly deregulated asset that should be directed back to the states or cities to bridge this huge gap and provide the roaming connectivity consumers need.

As a result of current policy and very competitive Wall Street and business models, any argument to the FCC that those incumbent service providers will now deploy 700 MHz needs to be greeted with educated and well-deserved skepticism. On the other hand, the explosion of private equity firms and the liquidity sitting on the sidelines means now is exactly the time to open the auction to the full market, not just a minority share as has been proposed. An open auction means those with money who see value will bid on this spectrum, just as we saw when licenses for television were offered years ago. Some went to national broadcasters, but the bulk went to local stations to be deployed locally in the most efficient manner for the benefit of each state and city. Can you imagine what the landscape would look like today if all the television license had been bought by national broadcasters? Everyone outside the major markets of New York City and Los Angeles would be getting national and local news not from local tv stations, but from the major networks in those two cities. The result would be virtually no local coverage, no local focus and no local benefit for the vast majority of America.

The reality is current wireless networks were built to handle phone traffic and limited data, not to manage internet based services and video downloads wirelessly at true broadband speed. According to representatives from virtually every state in the U.S., not only is there not enough broadband, there is virtually no true wireless broadband. Other carriers outside the U.S. have wireless broadband technology 40 times more efficient than ours. One expert at the TechNet conference illustrated the critical lack of understanding by stating, “If broadband were electricity and I turned on my microwave in my house, the lights in my neighbor’s house would dim.” According to Seattle officials, its deployment of local broadband resulted in “businesses reporting a 25% increase in customers and profits. In fact, customers appreciate that wireless broadband networks saves them from driving. It’s a good first start, but we can do better if we get real access to the 700 MHz spectrum. This means maximum roll-out of the 700 MHz spectrum is a future national security issue just from gasoline savings alone.”

Individual states have already demonstrated that they understand they must act for themselves to help communities build more wireless broadband access. Community leaders recognize that there are many situations and locations where fixed broadband pipe may never economically be deployed making the attributes of 700 MHz a compelling alternative.

Examine for a moment the current assets supporting the States in this objective. The 700 MHz auction, if held today under the most recent FCC plan, would send approximately 2% of the projected $13 billion (just $260 million) back to states, with the bulk going to the U.S. Treasury. But this same spectrum could bring in many times more revenue if it were fully opened up on the local level and required the most efficient deployment and use requirements possible. It stands to reason, then, that Congress would have an interest in opening up the auction just from the potential increased revenue standpoint alone. After all, who wouldn’t want to see not just the $13 to $20 billion predicted under the current restrictive auction plan, but double that amount or more, generated locally from untapped local market economic development?

Since the year 2000 Americans are consuming more data than voice services. We spend almost as much time on line as we do in front of the TV. Anyone attempting to “surf” the net on a wireless data network knows the inadequacy of current “broadband”, but because of the lack of federal leadership in really pushing this issue in a meaningful way municipalities across the country have been forced to take the lead. It is a good thing they have decided to step up because the U.S. economy is desperate for Personal Broadband, defined as “ubiquitous, affordable and truly high speed wireless internet access”. The wholesale Personal Broadband networks deployed in South Korea and Australia illustrate we can reasonably build more than one new network for government, security, consumers, education and the coming revolution of new intelligent multi-media devices within the 700 MHz spectrum. And while it is positive that states and cities are pushing forward, it is not equitable to deny them the tool that would make their jobs both easier and more successful: the direct ability for them to bid on the spectrum for local use. While the federal government may not choose to assist the cities and states in their efforts, it should NOT stand in the way and hinder their attempts to get access to this spectrum.

If the federal government were to make the 24 MHz slice of this spectrum available through local auction the states and communities could effectively run first with this valuable asset through quick deployments, mixed high and low density market roll outs by dates certain, using smart antenna technology to maximize throughput, and implement fair connectivity practices. Then witness how quickly communities manage their own destinies while the U.S. as a whole catches up in the global wireless broadband services race, all with increased revenue and economic development happening in the background.

The impact of local ubiquitous broadband is similar to the positive economic impacts we saw at the launch of local television licenses. We should be learning from those good results and allowing local decision makers to take the lead in the best interest of their communities. After all, this 700 MHz spectrum is coming back around from the very same television market thanks to digital TV transitions. Why allow this spectrum once held by a privileged few to be re-circulated to another privileged few giants based on terms they are lobbying for at the FCC? Recall our history on this: when wireless spectrum was first offered the FCC promoted at least two local competitors in each market. The FCC should adopt those same market fundamentals here to allow the incumbents a portion and to insure real competition at the local level simultaneously. The marketplace does not need an auction that will ultimately only benefit one portion of the sector at the expense of the entire market and all consumers.

Deregulation is a new attribute for broadband. Officials in cities and states have little exposure to the argument we are raising here. Common sense indicates that lawmakers and taxpayers would likely cheer an intelligent decision to generate more government revenue and stimulate more local economic growth while expanding the opportunity for real ubiquitous wireless broadband.

The FCC should know things have already changed. Since the revenue from the sale of 60 MHz of the spectrum has already been earmarked for national deployment, the FCC should impose public safety requirements with the sale of that band. By definition this 700 MHz spectrum should belong to the local markets that it covers and not to any national carrier. Hence we propose the upcoming auction allow local auctions to be held for the 24 MHz block under full and open rules with a focus on giving local and state governments access to the spectrum in partnership with the private sector while generating as much revenue to the government as possible from any liquid, but qualified, source.

And if the FCC still insists on managing these new opportunities under old regulated guidelines for the benefit of large telephone giants , then Congress should restrict the FCC’s oversight only to the old, regulated networks that the FCC understands so well and create a new body to oversee the exploding digital landscape that the wireless broadband revolution is bringing. Otherwise, the cities and states, and the people who live, work and play in them, will never be able to truly compete on the world stage.

After all, to the telecom giants, this spectrum is only about profit and locking in customers through restrictive rollouts and device use. But for policy makers like you this is about the economic growth and benefits to your states, cities and constituents. We hope you’ll keep them in mind as final decisions are being made for the upcoming spectrum auction and take action to assist states and cities in acquiring this spectrum for maximum local use.

Respectfully,

Scott Slater
Executive Director
Personal Broadband Industry Association