[House Report 107-443]
[From the U.S. Government Publishing Office]
107th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 107-443
======================================================================
AUCTION REFORM ACT OF 2002
_______
May 7, 2002.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Tauzin, from the Committee on Energy and Commerce, submitted the
following
R E P O R T
[To accompany H.R. 4560]
[Including cost estimate of the Congressional Budget Office]
The Committee on Energy and Commerce, to whom was referred
the bill (H.R. 4560) to eliminate the deadlines for spectrum
auctions of spectrum previously allocated to television
broadcasting, having considered the same, report favorably
thereon without amendment and recommend that the bill do pass.
CONTENTS
Page
Purpose and Summary.............................................. 1
Background and Need for Legislation.............................. 2
Hearings......................................................... 4
Committee Consideration.......................................... 4
Committee Votes.................................................. 5
Committee Oversight Findings..................................... 5
Statement of General Performance Goals and Objectives............ 5
New Budget Authority, Entitlement Authority, and Tax Expenditures 5
Committee Cost Estimate.......................................... 5
Congressional Budget Office Estimate............................. 5
Federal Mandates Statement....................................... 7
Advisory Committee Statement..................................... 7
Constitutional Authority Statement............................... 7
Applicability to Legislative Branch.............................. 7
Section-by-Section Analysis of the Legislation................... 8
Changes in Existing Law Made by the Bill, as Reported............ 8
Purpose and Summary
The purpose of H.R. 4560, the Auction Reform Act of 2002,
is to eliminate the deadlines for the auctioning of spectrum
located in the 698-806 MHz band (700 MHz band) and the conflict
that exists in statute regarding whether the Federal
Communications Commission (the Commission) has the authority to
determine when the auctioning of such spectrum should occur.
H.R. 4560 would prevent the Commission from conducting two
auctions (Auction #31 and Auction #44) of spectrum in the 700
MHz band on June 19, 2002 because conducting these auctions
would greatly undermine sound telecommunications policy and the
proper management of our nation's electromagnetic spectrum.
Television stations that useChannels 52-69 currently occupy the
700 MHz band, and will do so until the digital television transition is
complete. As a result, conducting Auctions #31 and #44 in June would
likely prevent the spectrum from being put to its highest and best use.
In addition, the auctions would occur before the Executive Branch
determines whether additional spectrum will be made available for
advanced commercial mobile services, which would prevent companies
interested in providing such services from determining how much they
should value spectrum in the 700 MHz band.
H.R. 4560 has three main components. First, the bill
removes the statutory deadlines for the receipt of revenues
derived from the auctioning of the 700 MHz band. Second, the
bill prohibits the Commission from commencing or conducting
Auctions #31 and #44 on June 19, 2002. Third, H.R. 4560
requires the Commission to report to Congress one year after
the date of enactment regarding when the Commission intends to
conduct Auctions #31 and #44 as well as the progress that has
been made in the digital television transition and the
assignment and allocation of spectrum for advanced mobile
communications services.
Background and Need for Legislation
When Congress enacted the Balanced Budget Act of 1997 (BBA
'97), Congress directed the Commission to auction spectrum in
the 700 MHz band for commercial use. Twenty-four MHz of
spectrum in that band was reserved for public safety use, and
six MHz was reserved essentially for buffers between the
commercial users and the public safety users of the band.
Thirty MHz was designated for commercial use in the so-called
Upper 700 MHz band (747 MHz-806 MHz), and forty-eight MHz was
designated for commercial use in the so-called Lower 700 MHz
band (698 MHz-746 MHz).
BBA '97 required the receipts from the auction of the Lower
700 MHz band to be deposited in the Treasury by September 30,
2002. BBA '97 also required the auction for the Upper 700 MHz
band to commence after January 1, 2001. The Consolidated
Appropriations Act of 2000 amended the BBA '97 to require that
the proceeds from the Upper 700 MHz band be deposited by
September 30, 2000.
Despite the deadline, the Commission has postponed the
auction of the Upper 700 MHz band five times. In 2000, when the
Commission first delayed the auction, the agency recognized
that it faced conflicting statutory requirements. While the
Consolidated Appropriations Act contains the deadline for the
deposit of receipts for the Upper 700 MHz auction, section
309(j)(3)(E)(ii) of the Communications Act requires the
Commission to include safeguards in auctions that, among other
things, ``ensure that, in scheduling of any competitive bidding
under this subsection, an adequate period is allowed * * * to
ensure that interested parties have a sufficient time to
develop business plans, assess market conditions, and evaluate
the availability of equipment for the relevant services.'' The
Commission also found that the Communications Act requires the
agency ``to design our auction rules and procedures so as to
manage the radio spectrum effectively and efficiently in the
public interest.'' (Cellular Telecommunications Industry
Association et al.'s Request for Delay of the Auction of
Licenses in the 747-762 and 777-792 MHz Bands Scheduled for
September 6, 2000 (Auction 31), Memorandum Opinion, FCC 00-304
at para. 6 (rel. September 12, 2000))
The Commission concluded that ``[i]n complying with
conflicting statutes, and resolving those directives as we
proceed toward an auction, we believe the Commission's primary
goal should be to conduct an auction that is fair, efficient,
puts the spectrum to the best use, and thereby best serves the
public interest.'' (Cellular Telecommunications Industry
Association et al.'s Request for Delay of the Auction of
Licenses in the 747-762 and 777-792 MHz Bands Scheduled for
September 6, 2000 (Auction 31), Memorandum Opinion, FCC 00-304
at para. 11 (rel. September 12, 2000)) The Commission also
concluded that a delay was appropriate so that bidders would
have an adequate time to develop business plans and assess
market conditions.
As the Commission recognized in 2000, the agency has the
authority to delay the auctioning of the 700 MHz band. In
Western Coal Traffic League v. Surface Transportation Board,
216 F. 3d 1168, 1173 (2000), the United States Court of Appeals
for the District of Columbia (D.C.Circuit) held that federal
agencies are permitted to ignore statutory deadlines ``where doing so
is administratively necessary in order to realize the broader goals of
the same statute.'' The Communications Act's goal of ensuring ``that
interested parties have a sufficient time to develop business plans,
assess market conditions, and evaluate the availability of equipment
for the relevant service'' provides the Commission with the authority
to ignore the statutory deadlines for auctioning the 700 MHz band.
The unique dynamics of the 700 MHz band create the
statutory conflict that exists. With most auctions, the
spectrum for which entities bid is either unencumbered at the
time of auction or will be unencumbered by a specific date
shortly after the auction is held. With the 700 MHz band, on
the other hand, the spectrum is currently occupied by
television stations broadcasting an analog signal on Channels
52-69. The broadcasters are not required to vacate the band
until December 31, 2006 or when more than 85 percent of the
television households in a particular market have access to
digital television, whichever date is later. Thus, if the 85
percent threshold is not exceeded in a given market, a
television broadcaster would not be required to relinquish its
spectrum in the 700 MHz band for conceivably long beyond
December 31, 2006. Some Members of the Committee have expressed
the concern that the transition to digital television has been
slow and that many communities will not achieve 85 percent
penetration of digital television by the end of 2006 at the
current pace. While the Commission and industry groups have
recently undertaken several initiatives intended to speed the
vacation of the 700 MHz band by the broadcasters, it is not
clear what the impact of these initiatives will be.
This situation makes bidding on licenses in the 700 MHz
band very difficult. The spectrum has propagation
characteristics that make it attractive for high-speed mobile
data operations. But it was not clear in 2000, nor is it
clearer today, when the broadcasters will vacate the 700 MHz
band. That makes it very difficult to develop a business plan
involving spectrum in the band, assess the market conditions
for use of the band, or evaluate when manufacturers would
produce equipment for new services in a band for which there is
no clear timetable for the exit of existing licensees.
In addition to concerns about when the band will be
available for mobile data services, it is not clear whether the
700 MHz presents the optimum band in which to offer such
services. Several other bands have been under consideration by
the Commission and the Administration for allocation and
assignment for third-generation wireless and other advanced
mobile services. Some of these other bands might be better for
companies that currently provide second-generation wireless
services and for international harmonization purposes. But it
is not clear whether these other bands will be made available,
especially the 1755-1850 MHz band, which is currently occupied
by Department of Defense and other governmental spectrum
operations.
Until decisions are made regarding the availability of
these other bands, companies cannot determine the extent to
which they should value the spectrum in the 700 MHz band. That
band may be the best spectrum available for advanced mobile
services. Several key decisions are not scheduled to be made
until the Summer, however, after the 700 MHz band is currently
scheduled to be auctioned.
The Commission currently has the authority to delay
Auctions #31 and #44. The agency is faced with conflicting
statutory mandates--one that requires that the auctions occur,
and one that requires that the Commission refrain from
conducting the auctions at this time. When faced with such a
conflict in statute, the Commission retains the discretion not
to conduct the auctions. The Commission should be using this
discretion to delay the auctions until sound telecommunications
and spectrum management policy dictate that conducting the
auctions is appropriate, and until the requirements of section
309(j)(14)(C)(ii) of the Communications Act can be satisfied.
Because the Commission intends to conduct the auctions in
June, the Congress must act to remove any ambiguity or conflict
in the law that gives the Commission the impression that it is
required to conduct the auctions then. H.R. 4560 will
accomplish that goal by stripping the deadlines from the
relevant statutes.
Hearings
The Committee on Energy and Commerce has not held hearings
on the legislation.
Committee Consideration
On Thursday, May 2, 2002, the Full Committee met in open
markup session and ordered H.R. 4560 favorably reported to the
House by a voice vote, a quorum being present.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House requires
the Committee to list the recorded votes on the motion to
report legislation and amendments thereto. There were no record
votes taken in connection with ordering H.R. 4560 reported. A
motion by Mr. Tauzin to order H.R. 4560 reported to the House
was agreed to by a voice vote.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee has not held oversight
or legislative hearings on this legislation.
Statement of General Performance Goals and Objectives
The goal of H.R. 4560 is to prevent the Commission from
conducting Auctions #31 and #44 until the nation's digital
television transition and spectrum management policy dictate
that such auctions should occur.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee finds that H.R.
4560, the Auction Reform Act of 2002, would result in no new or
increased budget authority, entitlement authority, or tax
expenditures or revenues.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
Congressional Budget Office Estimate
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, May 2, 2002.
Hon. W.J. ``Billy'' Tauzin,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4560, the Auction
Reform Act of 2002.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Kathleen
Gramp.
Sincerely,
Robert A. Sunshine
(For Dan L. Crippen, Director).
Enclosure.
H.R. 4560--Auction Reform Act of 2002
Summary: H.R. 4560 would repeal statutory deadlines for
auctioning licenses for the use of some of the electromagnetic
spectrum currently allocated to television channels 52 through
69. The bill also would direct the Federal Communications
Commission (FCC) to issue a report within one year after
enactment on issues related to rescheduling the auction of
those frequencies.
The budgetary effects of the bill would depend on both
actions by the FCC and economic factors. Proceeds could be
higher than expected under current law if all of the
frequencies are auctioned before the FCC's auction authority
expires in 2007; but they could be lower or zero if such
auctions are not completed by 2007. On balance, CBO estimates
that enacting this bill would reduce expected proceeds from the
authority to auction these frequencies. It would therefore lead
to a net loss of receipts and thus an increase in direct
spending of $1.4 billion over the 2003-2007 period. Because the
bill would affect direct spending, pay-as-you-go procedures
would apply.
H.R. 4560 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA)
and would impose no costs on state, local, or tribal
governments.
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 4560 is shown in the following table.
The costs of this legislation fall within budget function 950
(undistributed offsetting receipts).
----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-------------------------------------------------------------
2002 2003 2004 2005 2006 2007
----------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING
Channels 52-69 auction receipts:
Under current law:
Estimated budget authority.................... 0 -2,800 -600 -600 0 0
Estimated outlays............................. 0 -2,800 -600 -600 0 0
Proposed changes:
Estimated budget authority.................... 0 2,800 600 600 -1,300 -1,300
Estimated outlays............................. 0 2,800 600 600 -1,300 -1,300
Channels 52-69 auction receipts:
Under H.R. 4560:
Estimated budget authority.................... 0 0 0 0 -1,300 -1,300
Estimated outlays............................. 0 0 0 0 -1,300 -1,300
----------------------------------------------------------------------------------------------------------------
Basis of estimate: Under current law, the spectrum
currently allocated to television channels 52 through 69 should
be available for new commercial uses after the television
stations complete their expected transition from analog to
digital broadcasting technology. CBO expects that, under
current law, this transition will occur well after the
statutory goal of December 31, 2006. Companies would discount
the amount they are willing to pay for such licenses because of
the lag between an auction and completion of the transition to
digital television. We estimate that proceeds from the FCC's
auction of these bands, which is scheduled to start on June 19,
2002, would total about $4 billion under current law.
CBO expects that repealing statutory deadlines for
licensing these frequencies would affect auction proceeds in
two ways. On the one hand, if all of the affected spectrum were
auctioned at a later date, we expect that total proceeds would
be greater than $4 billion. On the other hand, eliminating the
statutory deadline would increase the likelihood that these
bands would not be auctioned before the FCC's auction authority
expires in 2007, particularly because the transition to digital
television is likely to occur well after that point. For this
estimate, we assume there is a 50 percent chance that auctions
of all of the affected spectrum would be held by 2007. (If they
do occur, proceeds would most likely be collected after 2005.)
Our estimate of proceeds under this bill--a total of $2.6
billion over the 2003-2012 period--reflects the net effect of
these two factors.
Pay-as-you-go considerations: The Balanced Budget and
Emergency Deficit Control Act sets up pay-as-you-go procedures
for legislation affecting direct spending or receipts. The net
changes in outlays that are subject to pay-as-you-go procedures
are shown in the following table. For the purposes of enforcing
pay-as-you-go procedures, only the effects through fiscal year
2006 are counted.
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars
--------------------------------------------------------------------------------------
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in outlays............................................... 0 2,800 600 600 -1,300 -1,300 0 0 0 0 0
Changes in receipts.............................................. Not applicable
--------------------------------------------------------------------------------------------------------------------------------------------------------
Intergovernmental and private-sector impact: H.R. 4560
contains on intergovernmental or private-sector mandates as
defined in UMRA and would impose no costs on state, local, or
tribal governments.
Estimate prepared by: Federal Costs: Kathleen Gramp; Impact
on state, local, and tribal governments: Angela Seitz; Impact
on the private sector: Jean Talarico.
Estimate approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional authority for this legislation is provided in
Article I, section 8, clause 3, which grants Congress the power
to regulate commerce with foreign nations, among the several
States, and with the Indian tribes.
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Section-by-Section Analysis of the Legislation
Section 1. Short title
Section 1 establishes the short title of the bill, the
Auction Reform Act of 2002.
Section 2. Findings
Section 2 makes certain Congressional findings.
Section 3. Repeal of deadlines for spectrum auctions
Section 3 repeals the statutory deadlines for the deposit
of receipts from the auctioning of spectrum in the 700 MHz
band.
Section 4. Termination of scheduled auctions
Section 4 prohibits the Commission from commencing or
conducting Auctions #31 and #44 on June 19, 2002.
Section 4 requires that the Commission submit a report to
Congress one year after the date of enactment that specifies
when the Commission intends to reschedule Auctions #31 and #44
and describes the progress that the Commission has made with
respect to the digital television transition and the assignment
and allocation of additional spectrum for advanced mobile
communications services.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
SECTION 309 OF THE COMMUNICATIONS ACT OF 1934
SEC. 309. ACTION UPON APPLICATIONS; FORM OF AND CONDITIONS ATTACHED TO
LICENSES.
(a) * * *
(j) Use of Competitive Bidding.--
(1) * * *
* * * * * * *
(14) Auction of recaptured broadcast television
spectrum.--
(A) * * *
* * * * * * *
(C) Spectrum reversion and resale.--
(i) * * *
(ii) Licensees for new services
occupying spectrum reclaimed pursuant
to clause (i) shall be assigned in
accordance with this subsection. [The
Commission shall complete the
assignment of such licenses, and report
to the Congress the total revenues from
such competitive bidding, by September
30, 2002.]
* * * * * * *
----------
SECTION 3007 OF THE BALANCED BUDGET ACT OF 1997
SEC. 3007. DEADLINE FOR COLLECTION.
The Commission shall conduct the competitive bidding required
under this title or the amendments made by this title in a
manner that ensures that all proceeds of such bidding are
deposited in accordance with section 309(j)(8) of the
Communications Act of 1934 not later than September 30, 2002.
This section shall not apply to the band of frequencies between
698 and 806 megahertz, inclusive.
----------
SECTION 213 OF THE ACT OF NOVEMBER 29, 1999
(H.R. 3425 of the 106th Congress and enacted into law by section
1001(a)(5) of Public Law 106-113)
Sec. 213. (a) Revised Schedule for Competitive Bidding of
Spectrum.--(1) * * *
[(2) Commencing on the date of the enactment of this Act, the
Federal Communications Commission shall initiate the
competitive bidding process previously required under section
337(b)(2) of the Communications Act of 1934 (as repealed by the
amendment made by paragraph (1)).
[(3) The Federal Communications Commission shall conduct the
competitive bidding process described in paragraph (2) in a
manner that ensures that all proceeds of such bidding are
deposited in accordance with section 309(j)(8) of the
Communications Act of 1934 (47 U.S.C. 309(j)(8)) not later than
September 30, 2000.]
* * * * * * *