Mr. John Stanton..........................................27

QUESTION & ANSWER.........................................37

P-R-O-C-E-E-D-I-N-G-S

   MR. ROONEY:  My name is Peter Rooney and I direct the Forum for Senator Rockefeller, Senator Frist, and the Council on Competitiveness.  It’s my pleasure to welcome you here today to another in an ongoing series of briefings on technology and new Economy issues.

    These briefings are brought to you by generous grants from the W.K. Kellogg Foundation, the Sloan Foundation, the David and Lucile Packard Foundation, and a new partner for us, the Samueli Family Foundation.  We are very pleased to have their support.  Henry Samueli, somewhat like Irwin Jacobs, is a noted engineering professor.  He also, perhaps more salient to us, he co-founded Broadcom, which is a very large high-speed networking outfit.  I think they’re probably the leading suppliers of chipsets for DSL and cable modems.

    I’d like to draw your attention to the briefing packets that you picked up when you came in the door.  On the backside of the first item is the agenda for today’s briefing.  Sen. Rockefeller and Sen. Frist are going to briefly introduce the topic and introduce the speakers, and then they are going to ask each of the speakers to come to the podium and give a ten-minute thumbnail sketch of the spectrum allocation issue from their own viewpoint.

    Once they’re done, the senators are going to throw the floor open to your questions.  We have microphones here at the edges I hope you can all see them, these two mics.  We ash -- we’re delighted that everyone’s here, but the senators are here, we’re here primarily for our congressional staff audience, and we ask that those of you who aren’t from congressional office to give those who are preference at the microphone.  We also grant our congressional staff audience anonymity.  However, others of you do get the opportunity to ask a question, for the benefit of the panel who will be answering the questions, we ask you to identify yourselves.  For those of you who are incorrigibly shy, we have green question cards.  It’s the second item in your packet.  As the speakers are speaking, if you’d please fill out these cards, and then towards the end hold them in the air, we’ll collect them, and the senators will ask questions for you, on your behalf, National Press Club style.

    Finally, the third item in the packet is a blue comment and evaluation card.  We please ask you, towards the end of the session, to fill this out and drop it off as you exit.  We pay a great deal of attention to what you say.  They help shape these briefings and we love to hear from you.   With that I’ll turn it over to Sen. Rockefeller.

   SEN. ROCKEFELLER:  Thank you Peter very much.  I don’t usually do this, in fact Bill and I sort of have a principle of not doing it, but there is just something about when the Chairman of the Appropriations Committee is with us that that needs to be recognized.  We’re very honored that Senator Ted Stevens is hear today, limping, wounded, but in the foot, he’s here and we’re very happy about it. Welcome Ted.

    As always thank you for being here.  We’re very happy, and thanks probably to Bill Frist that we’re back in Hart 216 -- filled -- and that’s what we want.We, as you know, we try to bring you the best possible speakers.We certainly have that today.  We welcome different points of view.  As usual, the responsibility falls on you to take those green cards or go to those microphones and ask tough questions once these gentlemen have made their presentations so that we have a lively discussion.  The point of this is to be interesting and informative, not to go through some kind of ritual. I mean - we are trying to catch up to - so we can make decent policy, or not policy, or whatever.

    Wireless communications obviously has exploded on a worldwide basis.  A hundred million Americans now use mobile forms of that, and that’s expected to grow by 25 percent in the next several years.  And now we’re talking about the third generation wireless services, 3G.  That will be a merger, so to speak, of the Internet and wireless and thus, in a sense, talks about an entirely new was of carrying on everything.  The PC becomes less important, and there is a new form of connectivity, and cyberspace and all of us are changed forever.  And they see that particularly going on in Europe and Asia at a much faster pace then is going on in this country.  And I think that both of our seated speakers -- our second and third speakers will -- are worry about that very much, and I know that Greg is also because Europe and Asia are very well underway on this.  I think American companies would be reasonable in worrying that they are going to be behind, that we’re not going to be out there until 2005.  Europe’s going to be out there now, or at the end of the year.  Can we close the gap?  Once you start something in technology, gap-closing isis a lot harder then it is for example, in a nine inning baseball game -- so that, that was my own creative thought.

    So, these companies are very convinced that they are being held back by a lack of spectrum, and spectrum availability is very important to them. They cannot operate without it. The difficulty of that from those who own the spectrum already is that they own the spectrum already. And they can be military, they can be, you know, telecommunications, they can be all kinds of different groups, and they own it. You can figure out ways to do all kinds of things, but you can’t create more spectrum. You’ve got just to figure out how to divvy it up. And, buying it and owning it is sort of like owning land, except I’m not sure that the government can condemn it. Maybe they can, maybe that will be a discussion for today. So, all of these things are very heavily on the mind of people, and make for a very legitimate argument.

    So, the battle is raging. That’s why we’re here. The struggle highlights a much larger need, and that is to find a way for the US government to engage -- if we can find that way -- in something called strategic spectrum management that accounts, as we so frequently say in government, for all parties; for both the people that want the new technologies and those who are incumbent users. Easy to say, hard to do.

    So we’ve got a terrific panel. Senator Frist, who is very good at this subject himself, will introduce that panel and you will then listen to them, and then you will just bombard us with questions.

   SEN. FRIST: Let me also welcome everybody. It’s great to be back after our recess, and to be able to jump right back in to a topic that is fascinating. One that is not well understood, I think, in the United States Congress as well as it should be. And one of our objectives -- as had been pointed out, and as everyone knows in the room, or has hears -- is really to educate, to allow an open discussion, and today is a topic that I know that I will learn a lot about over the next hour, an hour and a half.

    A whole range of issues: why is spectrum allocation an issue, the competitiveness of American wireless firms, spectrum management and the US government, the relationship there, some of the pending legislation I’m sure will be talked about. So again, by two o’clock, and we will finish right on time at two o’clock, all of us are going to be a lot smarter then when we came in. I’m speaking mainly for myself.

    Three great speakers -- and let me go straight to the introductions and we’ll proceed with them. Each of them will take about ten minutes, followed by our discussion period as has been proscribed.

    Greg Rohde is the Assistant Secretary of Commerce for Communications and Information. He is also the administrator of the National Telecommunications and Information Administration, or NTIA. He is a principle advisor within the executive branch on communications and information policy issues. He is an expert on wireless technology policy, and served on the US government delegation to the 2000 World Radio Communication Conference in Istanbul, which set ground rules for 3G services. He’ll be followed by Irwin Jacobs, who is to Rohde’s left.

    Mr. Jacobs is the driving force behind one of the world’s most innovative technology company’s. Dr. Jacobs founded QUALCOMM in 1985. As Chairman and CEO he has managed it’s truly explosive growth to a Fortune 500 Company with nearly 4 billion dollars in revenue today. QUALCOMM developed the leading American 3G technologies, and Dr. Jacobs was awarded the National Medal of Technology in 1994 for his pioneering work in wireless communications engineering.

    John Stanton, to my left, has been a leader in wireless services from the very beginning of the industry. He co-founded McCaw Cellular, America’s first large wireless firm, and went on to found four other wireless companies, including -- as we heard earlier -- VoiceStream Wireless, one of the fastest growing communications firms in the United States today, and the leading American provider of mobile phone services based on the GSM standard. Mr. Stanton services as Chairman and CEO of VoiceStream and he is a recent past chairman of the Cellular Telecommunications Industry Associations.

    We’ll hear from our speakers in the order in which I introduced them, and we’ll begin with Mr. Rohde.

   MR. ROHDE: Thank you very much Sen. First, and Senator Rockefeller, and Sen. Stevens. I really appreciate you inviting me back here at home. I say this is home because for about seven years of my life this is where I had about 90 percent of my meals, spent most of my evenings and my weekends when I worked here as a Senate staffer. So, I know what our Senate staffers put in. I also know that in the Senate it is protocol to speak with charts. So I brought several charts here that I want to go through in laying some of the background work with respect to 3G.

    But before I get to the charts I thought I’d begin by asking and attempting to answer or describe the basic questions here like, what exactly is third generation wireless? For the most part, when we speak about third generation wireless, we’re talking about -- (pointing to cellular telephone) -- it’s one of these things on steroids. But, unlike the Chinese Olympic rowing team, it’s a drug we’re willing to take, and a lot will be used. Another image to use when we talk about 3G Wireless is, think of one of these, which is a laptop computer, and plugging into one of these, broadband and mobility. And so when we talk about 3G Wireless, that’s what we’re talking about. We’re talking about devises that will go well beyond what we currently have today, whether our computers, whether they’re tethered, or whether we use cell phones.

    Today, for the most part -- (pointing to cellular phone) -- this is a second-generation wireless device. And, for the most part we use this to make phone calls. In fact, according to a recent FCC report, about two- percent, only about two percent of the revenues from second-generation wireless devises are related to data. Within about seven years, so project that about two-thirds of the revenues from wireless devices are going to come from data and non-voice services. So we think of third generation wireless, we’re thinking of devices that are going to do a whole range of things which today we’re only seeing a glimpse. Today, we see some cell phones that are coming out with web capability. i-mode in Japan, for example, offers a service where they have over five million customers that were signed up in less then a year. Where, in Japan, you can take your web-based phone and go into a restaurant, and scroll down to the coupon, show it to the waiter, and you get the discount on the meal. So these are some of the early applications that we’re seeing of the Internet interfacing with a wireless device. And we’re only seeing the tip of the iceberg of all of this.

    Now I’d like to turn to these charts, and again, the charts that I have up here -- and we passed out beforehand -- you’ll see these charts that are in paper form before you, rifle through those if you can not see the charts well. What these are, these charts here, shows some very speculative forecasting with recent to the Internet and wireless, and the reason why I say that they are very speculative is because, both the wireless industry and the Internet use is growing so fast that it’s very difficult to get a handle on how fast it’s all growing. If we look at this first chart here, we can see that, currently, in the current year 200, that roughly in the U.S. we have about 107 million Internet users. By the year 2004, that’s expected to grow to over 210. If you look at this globally, there is about 300 million users today on the Internet. By the year 2005, that’s expected to more then triple to over a billion. And if we look at wireless, currently today estimates are that 2000 there will be 112 million wireless users. The FCC report just came out with numbers for 1999, and those numbers showed around 90 million wireless users in the U.S. That’s expected to grow by the year 2005 to 237 million users. And if we look at this globally, currently there is about 530 million wireless users across the world. And by the year 2007, we’re looking at about 1.4 billion wireless users around the world.

    Now, the question is that there are already in Europe and in Asia, some European countries are already moving to allocating spectrum for third generation wireless. We’re also seeing Asian countries already move ahead. And the United States has yet to make any specific allocations to date, for third generation wireless, and there’s a reason for this. For the most part, European nations and Asia nations, and many other nations don’t have the same challenges that we have. Many of these other countries don’t have -- they have unencumbered spectrum. But in for the most part, in the United States, our spectrum is occupied. Back to your analogy Senator Rockefeller about it being looked upon as land, for the most part land has all been claimed. It’s all occupied. This chart here, this is kind of the NTIA official poster. This is the spectrum allocation chart. And if you understand this, you understand our entire spectrum plan for the United States Government.

    (laughter)

    But, if you’re like me, this is a very difficult thing to get a handle on. So what I did was I tried to break this down a little bit to give us a sense as to what we’re dealing with, with respect to how we currently have our spectrum allocated, and the kind of challenges that lie ahead if indeed we are going to look at allocating additional spectrum for third generation wireless.

    What this pie chart does, is this is broken down -- that first chart I just showed you -- and looks at the entire universe of spectrum, which is about 300 GHz. And if you look at the chart that I just took down, about 93 percent of all the spectrum that we have in the United States is shared spectrum between federal and non-federal users. Only about 1.4 percent of all the spectrum is exclusively federal use, and 4.9 percent is non-federal government use. And the 4.9 percent is the part of the spectrum that is exclusively under the jurisdiction of the FCC to regulate for commercial purposes as well as state and local governments.

    This next chart breaks down the spectrum in a different manner. Up in the left-hand corner, we see the total universe of spectrum, 300 GHz of spectrum. If one small piece of that, the spectrum that’s under 3 GHz is what contains 93 percent of all the federal allocations and 96 percent of all the non-federal allocations. So back to the land analogy Senator, if all this land has got a stake in it right now the population is highly concentrated onto one piece, and that is under three GHz. If you break down the allocations under three GHz, you see that 13.7 percent is government exclusive, about 30 percent is non-federal government exclusive, and about 55 percent of that under 3 GHz is shared between federal and non-federal users.

    If you want to break down how the federal government uses the spectrum that is has, and this includes both the exclusive federal government spectrum as well as shared uses, the biggest chunk is for national defense, about 40 percent. The next largest category is about 22 percent. That’s for law enforcement and security. We have recourse management control for 20 percent. Transportation uses about 12 percent of all federal government spectrum. And about 5 percent is for the whole basket of other uses.

    Back to the World Radio Conference in Istanbul, which occurred in May, and third generation wireless, or IMT-2000 as it was known. Between this last radio conference and the previous radio conference -- World Radio Conference -- three large bands of spectrum were identifies as possible areas where third generation wireless would develop. And to give you as sense as to why they were developed, let me give you a little bit of history. Going into the World Radio Conference, the issue that we were facing from the United States Government perspective is that the Europeans took an approach, were advocating an approach to say, we want to identify one band of spectrum and say that that one band of spectrum is going to be tied to a particular technology, third generation technology, and if any country wants to have a third generation wireless devise that can roam globally around the world, it must meet the specifics of that one technology and that one band of spectrum. The United States was not comfortable with that position. A lot of Latin American countries were advocating that position. They said, well we want one band of Spectrum too, but we want a different band then what the Europeans are talking about.

    So beginning last fall, one of the first things that I did, new into the job, and have been working on ever since -- we began the process of developing the US position. And the US position going into the Istanbul Conference in May was that, we wanted to advocate a multi-band approach. We thought it was best that the World Radio Conference sang the signal to the manufacturers that we want to narrow down the specific bands of spectrum that three generation devises should operate but we didn’t want to tie it simply to one band. We wanted to say, let’s allow for multiple bands. We were fortunate in that we succeeded in that approach in convincing the rest of the world to go along with this; that we should have a multi-band approach to developing third generation wireless.

    With this chart here is it shows how the bands that were identified under the World Radio Conference for third generation wireless relate to the current incumbent uses we have. Again, all of the land is occupied. These bans of spectrum are all under three GHz. So, we’re dealing with the very crowded are of spectrum. If you look at this chart, the very bottom of the chart it’s got the IMT-2000, these are the bands that were identified at the World Radio Conference. The first band is from 1710 up to about 2200, one of the bands that was identified. If you look up here above, we see where incumbent uses are. At the very top of the chart we see were the US incumbent uses are. We have a small part of spectrum over in 1710 that has already been allocated to the FCC and is planned for auction by September 2002. Right next to there is, the white space, is where we have the Federal government as an incumbent, which is largely the Department of Defense. And this particular band of spectrum, that the Department of Defense is an incumbent, they perform things like combat readiness reform -- combat readiness training, space to ground link, which is probably the most expensive part, or the highest amount of investment that the Department of Defense has in this particular band, as well as some fixed microwave services.

    Also, within that first band that was identified, we have our PCS services, which are incumbent uses, and this is and important part of the US position as well. We wanted to make sure that the 3G spectrum that was being identified, that we wanted to allow our first and second-generation wireless services to evolve into third generations wireless. So it was very important that the bands that were identified included the PCS and cellular incumbency within the United States so that these operators who currently have these licenses can now evolve into the third generation wireless without having to go through an entirely different procedure.

    If you look just below, you can see the relationship with where Europe has some incumbency within their wireless use, and you can see over the green -- in the third column there in the green -- that is where Europe has their GSM services. So this is how you can see a relation where we are will other countries.

    The second band of spectrum that was identified at the World Radio Conference is the 2500 to 2700. And this currently, is where you can see up here, in the United States, our incumbent users here are commercial; largely commercial and educational. This is where we have the NMDS band, which is -- . Big stakeholders here are some of the major companies like Sprint and WorldCom, who have significant licenses in here. For several years the NMDS services were one-way video services. And a couple of years ago the FCC authorized two-way use for these bands. The companies that currently hold these licenses are looking at these kinds of services as a way of providing broadband wireless capability.

    The other band that was identified at the World Radio Conference is down between around 700 and 960. And you can see, this is where we have our incumbent use here in the United States, is our cellular use and also we have -- this is where we have television, the channels 60 to 69 debate currently we’re having. That’s where 1746, 1764, 776, and 794 are located. And that’s the current incumbent use there.

    To kind of sum up, this is where we stand right now as we look at the bands that were identified for IMT 2000. Part of the first band that was identified has already been allocated to the FCC. They are scheduled to auction that by September 2002. Another part, 1755 to 1850, DOD is the incumbent there. Right now, NTIA is conducting a study looking at the services that are in that band, and looking at the costs that would involved if we wanted to move or find spectrum out of that band., We also have another band that has already been allocated to the FCC. And then finally, the NMDS Band, 2500 to 2690 is being studied by the FCC.

    Not to sum up very quickly, as we move ahead and looking how we are going to develop third generation wireless within this country, we have to go through a number of steps. One is, we have to assess what our spectrum needs are. We need to do an assessment of what we need to do to develop third generation wireless. This is too important to let pass by. If the United States does not get on the front part of this wave, we will lose our leadership in access to the Internet. Some analysts predict within five years, a half billion people will be accessing the Internet through a wireless devise. If that is true and the United States does not have a fully robust wireless application to access the Internet, we’re going to fall behind the rest of the world. So this is very important. But we need to assess what exactly our needs are. We also need to look at what efficiency gains could possibly be made. The current incumbents in the commerce sector, what kind of things can they do to make better use of the spectrum they currently have, as well as in the federal sector? What things could we do with the federal government users to be more efficient; to make better use of their spectrum?.

    We also need to look at sharing possibilities. The equation isn’t simply a matter of handing spectrum from one incumbent to give it over for third generation wireless. There might be possibilities where we could have shared use between third generation wireless and the current incumbent services. We need to look at all that. We need to do cost-benefit analysts of looking at all that. And any allocation decision that we make, needs to be made very, very soon.

    The principles that we’re looking at are going to be: we really want to have a flexible approach. We want to make sure that the policy should be technologically neutral. We want to allow for market competition to decide. We also have to make sure that in this approach that we have to take care of the incumbent users because political gridlock will not benefit anyone. It will not benefit the federal users. It will not benefit the private sector. And so with that general background I’d be happy to answer questions after the other speakers.

    (Applause)

   SEN. FRIST: Thank you very much Greg. Doctor Jacobs, thank you.

   DR. JACOBS: Thank you very much. It’s very good to be here. Thank you for the invitation to address this group. I did note your comment also about the real estate. It turned out it was back in 1989 that we did our first demonstration of the CDMA technology and it was a lot of skepticism at the time that that would be in fact a useable technology. And one of the examples we put up was the real estate one. They’re not managing any more real estate. Use your spectrum efficiently. And that in fact was one of the arguments for going to CDMA. It is now recognized pretty much by just about all manufacturers and operators that going to the third generation, the technology that will be used is CDMA. So that issue of using spectrum efficiently because they're not making any more if it is a very critical one.

    Now, third generation has been discussed. There are many different points of view. In affect, it is not only to provide and support efficient voice communications but in particular, to now add to that an efficient wireless Internet access. It’s to provide higher data rate services-wireless -- and to do so in a way that is cost competitiveness, indeed, with landline approaches, and so that it can be used by a broad variety of subscribers. And so, the attempt here is to go and provide wireless Internet access.

    Now, as in all these things, there are people that put down specifications, and so 3G was defined as providing 144 kilobits per second. You don’t have to remember these exact numbers. When you’re mobile, perhaps 384 kilobits per second when you’re pedestrian, I’m not sure how often you need that as a pedestrian. And, perhaps 2 megabits per second when you’re in a fixed application. And so, some numbers were put down.

    Luckily, the technology, indeed, does allow one to move ahead to those numbers. And so one aspect of it was providing wireless Internet access. By the way, another agreement in going thought the IT standard was to allow the different flavors that might be used in third generation systems to make use of the, both existing wireless networks that are out there. There are two networks that allow you to, somebody to try dialing you at your home number if you are over in some other state or country -- for that number to be forwarded to you; mobile wireless networks. There are two large systems. One, based on what we call NC41, the other GSM Map. And the intent here was to have the various flavors of 3G support both of those networks. Of course, the main network in the future is going to be the Internet and so the real intent is to have both data, and very quickly I suspect, more and more voice using Internet protocol as opposed to going over the switched systems. But the existing switched systems are going to be still in use by large numbers of people, perhaps a billion in 2002, 2003, and so it’s important that you can maintain that compatibility going forward.

    Now the other aspect of the 3G has to do with spectrum and there are some that argue that it had to be very specific spectrum. And, of course, providing wireless Internet access, that’s not an issue of which spectrum you’re using, it’s, how well does that technology work? But there is the argument that one needs to use only very specific spectrum. We think that in fact is a mistake, that one should use all the spectrum that’s out there as efficiently as possible and not try to only use part of it efficiently and part of it inefficiently. There’s a lot of spectrum today that’s being used relatively inefficiently.

    The issue was brought up about the US being well behind Europe and Japan and I myself don’t agree with that point. I think, in fact, the competitive situation here that has allowed multiple technologies to be available and what the market’s placed aside, has allowed a significant -- the largest number of subscribers of any of the technologies to be on CDMA and that’s where the other regions that aren’t using are going in the future. And so, in a sense, we’re already there.

    But, even more interestingly, the next year 2001, will see a large deployment across the US, Korea, Japan, Australia, South American, and many places where -- that are currently using CDMA -- a large deployment of the first wide-spread 3G technology. And we refer to that as the 1X multi-carrier. The name is not important but in fact, it is going in place here in the US, throughout the US, as well as elsewhere, and will be widely available by next year. And will be supporting the mobile data rates that are required, or have been specified under the ITU. So you will have high wireless internet access, initially about 140 kilobits per second and then rapidly changing, going up to 380 kilobits per second. So that will be in place, in fact, next year. The chips to support that are already being shipped. Not that’s an existing spectrum -- not greenfield spectrum -- just using the existing cellular and PCS frequencies that are available today.

    Just behind that is another technology that is just completing the standards activities as we speak, that we refer to as high data rate. And that supports 2.4 megabits per second of communication. And so that burst rate is -- probably supports as well as you can imagine, any of the known applications that you might be interested in. It paints a CIT screen very rapidly. And so, that 2.4 megabits per second peek rates, downloading to your computer, you get this very high performance.

    However, the thing that is important is not just the peek rate, it’s also, how many subscribers can you get per antenna that you put out there on a cell site. Because that effects how much you have to charge everybody for the use of the service. And so it’s really the average use, the average number of subscribers that you can support that becomes very important. And we’ve been looking at some of the early numbers. I must say that you hear the words, "narrow band," wide band," et cetera. When we refer to 1X we refer to it as one times the existing bandwidth used by CDMA, which is one and a quarter megahertz. So each carrier is that bandwidth. The wide-band refers to five megahertz. And so, you go to a somewhat wider band.

    Now several years when we submitted a proposal for a PCS standard in the US, we ourselves, believed that you needed to go to the wider bandwidth per carrier in order to efficiently support data applications -- high burst rate data applications, Internet access. But what we then found since, is that that is not necessary, and in fact, one can do it with the same bandwidth we’re using today, one and a quarter megahertz in CDMA and gain not only this 2.4 MB per second type of data rates but interestingly, very high efficiency for how many subscribers can you handle.

    I was looking at some of the projection that were made based on computer simulations as so on for the wide-bandwidths -- and by the way, any form of CDMA we believe is the right way to go. We’re strong supporters of it obviously, CDMA. But looking at the numbers that have been available, when one goes to five megahertz and compares it to the one and a quarter megahertz, right now as the standards exist and have been simulated -- they really haven’t been measured at the five megahertz values, we seen to be getting about 60 percent more capacity on voice by using the multiple one and a quarter megahertz rather then multiple five megahertz, and something like three times the number of subscribers on data, so that the argument that one needs to go to wide bandwidth actually is not the way it is turning out today. Today, you have lower costs, more subscribers available per antenna one the multiple one and a quarter megahertz. So it’s kind of an interesting thing. We, ourselves did not realize that when we started, but by properly optimizing we were able to make that happen. Now that is important because that is what is allowing the 3G technology to be rolled out next year. Actually, it’s going to start this year over in Korea, but next year throughout the US. And, by using the same bandwidth that you use today, you simply have to drop a different chip and some software into the phones and you can allow the phones, therefore, to be upgraded to 3G. it’s not a revolution, it’s a simple evolution.

    And again, that’s important, and again that’s why I say, I believe the US is ahead. We’re able to do that today. Others that have only allowed GSM to be used, such as in Europe, kept all others out by agreements among the governments -- in that case, they have to go to a revolution. They have to change from a time-division technology to a code-division technology. So we’re kind of ahead on that.

    What does that mean? Well that, as was mentioned briefly by Greg means that, you’ll be able to use your phones, of course, for surfing the Net. And by the way, that browser technology has been in these phones for probably two or three years, but the networks have not supported it well. They’re only really coming to support that more recently. Or, you will be able to plug, with a cable, your computer into the base, and use this as an external modem at these very high data rates. Or, what did I do with it, interestingly, since you put up a computer before, this is actually one that’s for sale using 64 kilobits over in Korea, but just plug a PC card into your computer slot and run it at the high data rate wireless rather then running -- needing the wire.

    So, the 3G technology is coming, and will be here next year. And by the way, other aspects of this technology -- it does, for example, support one of the significant needs in this country which is, emergency 911, E 911 without any changes -- without any significant changes it can be available early and no waivers, for example, are required.

    Now, the other argument and concern, and it’s a serious one, is the fact, as has been detailed by Greg, that the spectrum available for use, here in the US is different from that that’s been specified in other regions for use in third generation. Now, We’re going ahead and using existing spectrum as well as, we hope, new spectrum. But others are only using Greenfield. They don’t have a way easily of upgrading existing users to 3G capability so they’re going ahead and looking at greenfield spectrum.

    And so one of the questions is that, does that really cause a major problem here? Well luckily again, technology is coming to solve these types of problems. As you know, today you can buy phones at a multi-band that operates in different frequency bands. For example, the PCS band at 1900, which is one of those areas colored in, and the cellular band at 800. There are other bands also, that are out there. The technology to do that is available. We’re using it today. It’s a very small additional cost, but it is some additional cost. Interestingly, that delta cost is coming down because we’re going to new technology, such as direct conversion. I won’t get into the technical details. And so, one is able to build phones that will adopt whatever region you’re in to that frequency band and that does give us flexibility to use various bands that can become available.

    Not there will always be multiple modes. And a 3G phone is going to have to also operate with 2G technology whether it’s 2G CDMA, CDMA1, or GSM. And what is that? Because, when you first put it out, there are only islands available and you want to be able to communicate more broadly, and so you have multi-mode capability as well as multi-band. And so every phone is going to have that. You have to have the multi-band in order to have a competitive phone. There will also be multi-mode. It costs very little now to add these different technologies. We’ve been able to get them close enough. So, it costs very little to add the technologies to the same piece of silicon along with many other functions. And so, the technology is coming, in a sense, to the rescue. It allows the multi-band use. It allows multi-mode use. And it does that at low costs so that one can get the economies of scale.

    So, we’re looking forward to having wireless Internet access available and becoming heavily used beginning next year and then growing there after very rapidly, we believe. We think it’s going to be the next major piece of the wireless business and we expect to be seeing it happening here as well as in the rest of the world fairly soon. Thank you very much.

    (applause)

   SEN. FRIST: Can everybody hear in the back of the room? If you can’t hear, raise you hand up in the air. So you can hear all right? Because these microphones are so directional I wanted to make sure. Mr. Stanton, thank you.

   MR. STANTON: Thank you senator. Thank you for the opportunity to be here. I have been in Washington all week talking about a transaction we’ve been working on so it’s a great pleasure to have an opportunity to talk about something having nothing to do with that transaction for at least a few minutes. I, as Sen. Frist said, in my career -- basically I have spent my entire career in the wireless business. I’ve had the pleasure and opportunity to participate in a number of different companies and to really have built, what I think is a -- built on what I think has been one of the great opportunities in our country in the last twenty years.

    One of the additions I would just make to the description that’s in the prepared materials is that we actually started our business, VoiceStream, as a subsidiary of another business and I’m still chairman of that business today, and I think it’s important, and I’ll make a comment late in my remarks, about the opportunities in rural areas. I’m also the chairman and chief executive of a company called Western Wireless. And Western Wireless operates using cellular bands, has about 103 licenses serving all of a number of rural states, including: North and South Dakota, Montana, much of Wyoming, Kansas, West Texas, Nevada, and Utah. And we have had an opportunity as such to see, literally, both perspectives. The most rural parts of our country, as well as the opportunities to serve national -- provide national services using our VoiceStream PCS business. I’ve also had an opportunity through Western Wireless. We have acquired license interests overseas. We own license interests in nine different countries including controlling interests in Ireland, Iceland, and then our garden spot operations, where I'd encourage you to vacation: Ghana and Haiti.

    (laughter.)

    The opportunity for us has been then to see a number of different perspectives on both the way spectrum is allocated in this country, as well as overseas, and frankly, some of the practical applications. And that’s what I’d like to focus on in my comments today.

    Spectrum, fundamentally, for wireless companies is the lifeblood of our business. If we don’t have spectrum, we simply don’t exist. And frankly, we need more spectrum in order to operate efficiently. Less spectrum, frankly, creates challenges such as the need to locate more towers and to have less geographic flexibility in where we locate towers. So, for example, some of the issues that occur in some of your local communities with respect to sighting -- whether we have towers in people’s backyards -- literally comes down to being a function of the amount of spectrum that’s available to us. The more spectrum we have, the more flexibility as companies that we have in where we locate those towers.

    Our industry is going to celebrate its seventeenth birthday next month. The first cellular system became operation in October of 1983 in Chicago. And yet, just a month and a half ago, our industry passed the milestone of having 100 million cellular and PCS customers in the United States. It’s a tremendously exciting type for the industry because despite the fact that it took us seventeen years to add our first 100 million customers, before the industry achieves it’s twenty-first birthday, it’s likely that we will have over 200 million customers in the United States.

    And yet, as the materials in preparing for this briefing suggested, the United States is behind. We are behind, I believe, for some fundamental reasons, and I’d like to talk a little but about that. But specifically, when I say we’re behind, let me define my term.

    The United States today has roughly 100 Million customers. So roughly, over thirty percent of the US population has a phone. In comparison, in countries were service has been available about the same amount of time, in the United Kingdom, the penetration rate is nearly 40 percent of the population. In Italy, the penetration rate is over 50 percent. And in countries like Finland, the penetration rate, the percent of the population that has a phone, is over 70 percent.

    I think there are a number of reasons. Some of them I’m sure have to do with the competitiveness of the service that me and my competitors provide. But I think, more fundamentally, the amount of spectrum and the way spectrum has been allocated in the United States has had everything to do with the slower growth rate and the slower development of the industry. And let me make sure that I punctuate that by saying why it’s important.

    In my view -- and I obviously have a very strong bias -- but in my view, wireless communications, for the reasons that Greg and Irwin spoke of, represents one of the fundamental elements of twenty-first century infrastructure. If we fall behind at the beginning of this new millennium we will stay behind and we will lose in a number of technological races. It is very fundamental for the American economy, and the global economy that we be able to provide these services.

    There are for reasons I’d like to identify with respect to why we’re behind in terms of licensing in the level of penetration. The first is the amount of spectrum that has been allocated in the United States. And as this chart illustrates, the amount of spectrum allocated in the US is about 189 megahertz of spectrum available for all of the carriers that provide mobile communications services. That includes the cellular, or 2G companies. That includes the companies operating on PCS services at 1900 band, and also includes those operating on what were formerly. . . (end of side one of tape)

   MR. STANTON (cont.): . . . simply put, they have allocated twice as much of one of their vital national resources to twenty-first century infrastructure.

    Jacob, if you want to help me. I was told that charts are important, but I’m not good at charts.

    The second chart illustrates this even more acutely because, even though as I indicated, the level of penetration in the US is below that of many of the other countries, this chart illustrates that the number of customers per megahertz of cellular mobile radio services is dramatically higher. Now you could say, that means we use our services more efficiently. But as a practical matter, what that means is, in general, the prices for services are higher, the costs of providing those services are higher, and on average, the American customers use their mobile phones less often or few minutes a month then many of these other countries.

    We have 529 thousand customers per megahertz in comparison to one-sixth the amount in the United Kingdom, and about one-fourth the amount in Japan. In total, what that represents is that we’re compressing more users, we’re creating quality of service problems for the carriers and for the customers, and we’re creating challenges for us as we look forward to the next generation.

    The third chart addresses a single issue that I want to come to in terms of the licensing. And that is that we have a cap. In effect, instead of allocating between having steak for some of the children, and gruel for others, we allocate so that all of the carriers in the United States have gruel.

    (laughter)

    None of us have enough spectrum with which to operate our businesses because we are only allowed to own a total of 45 megahertz of service. And it will come to as I -- later in my comments I’ll talk about the mixed objectives that we have in terms of allocating spectrum.

    The second fundamental issues goes to the way we license services geographically. In every other country I’ve spoken about today, in general, licenses are allocated on a national basis. There are some exceptions. Japan allocated some licenses in nine geographic areas. In Brazil, there were a dozen geographic areas in which spectrum was licensed. In the United States however, cellular licenses, 800-megahertz licenses, were cut up into 734 different jigsaw puzzle pieces, 734. But in ten years we learned a lot. We reformed and the PCS spectrum, which was allocated beginning in 1994 -- we narrowed the size of the jigsaw puzzle so that there are 493 different geographic areas.

    I’m from the Seattle area, and if you know Seattle, if you want to drive from Bellingham, in the northern part of our state, down to Vancouver, which is on the Oregon border, you literally, in cellular business, go through eight different geographic licensed areas. And what that has meant as a practical mater for a carrier such as me is I’ve had to go out and acquire licenses. Initially licenses were issued based on comparative hearings in 1982 through 1984, then based on lotteries in the latter rounds in the later rounds of the cellular, and now based on auctions. I would tell you that the auction method is far better, but fundamentally, by auctioning off little pieces, or issuing pieces by lottery it creates inefficiencies as carriers literally have to reassemble the jigsaw puzzle.

    The third issue is, delays in the licensing. And the causes of this are multiple. I’m not trying to lay blame at the feet of the FCC or anyone else. But literally, as policies changed overtime, the first cellular license applications were submitted in June of 1982. The last lottery for the 734^th license to be issued wasn’t issued until December of 1999. So it took seven years for us to get through a licensing process. In contrast, in the United Kingdom, in Germany, the process was done in less then six months.

    In PCS, again we reformed somewhat. We began the process in December of 1994, in part because of the more efficient part of the efficient ability to issue license via auction. Unfortunately, we began that in December of 1994, and we have not yet completed the process. Hopefully, we will complete the process with the last round of auctions that are currently scheduled to begin in December of this year. But the delays has caused awkwardness in the issuance.

    And lastly in terms of the licensing process, we’ve been hugely challenged by the fact that there has been litigations, there have been terrible problems in terms of filling in the holes. For example, Western Wireless offers services across the state of North Dakota. But we have literally been offering in the eastern most part of North Dakota using temporary authority for the last six years. No permanent license has been issued even though the original lottery occurred over ten years ago. There was litigation involving that license. But it’s literally gone back to the FCC and sat there for the last five years.

    So what do we need? In my view we need a long-term view of spectrum. Spectrum represents an opportunity for us to continue to advance as both the previous speakers have addressed. And I think, as Greg’s talked about, there’s clearly a desire to do that on the part of the government. I would encourage you, as staffers and senators, to think about the opportunities we have in the next generation. But the licensing process has to be simplified. It has to be long-term and predictable. It’s important for the industry as Irwin spoke enough, to be developing standards that allow us to offer uniform, high quality services across the country. It’s important for the manufacturers to be able to do the non-reoccurring engineering that they need to be able to develop the products. It’s important for carriers like me to be able to raise the capital necessary with which to build and develop the business.

    But we need a clear and simple licensing process. Licensing in the US has become something of a jump ball. There are competing objectives. For example, are we trying to maximize tax revenues? Are we trying to maximize diversity? Are we trying to maximize the quality or the price of services to companies? Many look at the opportunities that Germany and the United Kingdom have of issuing spectrum earlier this year via auction, and raising a total of 75 billion dollars as an opportunity. I would agree with that from a government’s perspective. It does represent a burden from the point of view of the carriers, and will ultimately result in higher prices to consumers. It’s a choice that government has to make. But the challenge I would put in front of this group is, there is a need to have a single, unified policy; a basis on which we can issue the licenses and go through that process.

    I’ve already spoken to the notion of geographic areas. Fewer fundamentally is better. It is very difficult for carriers to put pieces back together because it creates and awkwardness if you are missing one license in issuing that.

    Lastly, I’d like to speak to the need to bridge the digital divide. There have been huge challenges in providing services in rural areas. Some go to the fundamental economics of our business. It is more expensive to provide wireless services in sparsely populated areas then it is in urban areas. But frankly, in my perspective, one of the great victories of the Telecom Act of 1996 was the commitment to allow wireless to represent a fundamental substitute, a competitor for wireless services. That’s been undermined by a number of the states.

    We joke in our company -- in Western Wireless we have been an advocate of trying to get states to allow us to participate in the separations and settlements process -- the universal service process -- to provide local services in many communities. We have spent now about two million dollars litigating in thirteen states. We have had in Montana, for example, we’ve has 529, I believe it is, interrogatories in response to a simple application to be certified as a carrier providing local exchange services in the state. The two million dollars we’ve spent in legal fees frankly, we could have bought telephone companies in virtually every state we operate, and circumvented the rules. But that wasn’t what we wanted to do. We wanted to get licensed, we wanted to have the opportunity. There continues to be an opportunity for us as a country to develop and to extend the benefits of wireless communications to rural areas. But not when frankly, several of the states are using it as an opportunity to perpetuate the monopoly wired carriers.

    Let me end on a hopeful note. While I’ve said we’re behind in terms of penetration, we’re not that far behind. The opportunities for us, I thin, in the digital age, for next generation technologies are enormous. Most of the services, such as the i-mode service in Japan, are being provided on a very slow speed basis today. As Irwin’s talked about, the next generation both with the technologies that his company advances as well as other technologies going to be used in the US, are much faster then the i-mode services that are currently deployed in Japan that have taken ten million customers in about 18 months. But the opportunity for us is there if we work not. We need to have a uniform spectrum policy, and we need to have rapid licensing.

    From my point of view, third generation is the wrong phrase; it’s next generation. It is not a destination, it is a path, and it’s a path that will continue on as we move through the twenty-first century. Thank you.

    (applause)

   SEN. ROCKEFELLER: Thank you John, very much. Now we have a number of green cards up here but not enough. So, you’re going to remedy that, either at the microphone or on the green cards.

    This question comes from a congressional office: is the way the US engages in spectrum planning conducive to good strategic decisions, or does our system lead to bad decisions, or decisions that are just slow? Should, for example, NTIA’s and the FCC’s responsibilities be combined so that we have only one decision maker? That’s to the panel.

   MR. ROHDE: Since the FCC’s not here, you want me to speak for them?.

    (laughter)

   SEN. ROCKEFELLER: That I might hear from you, Greg. (laughter)

   MR. ROHDE: I’m not sure I share the premise of the question. The fact is, we do have a spectrum plan in this country, it’s just that it’s always changing. And, the question is to whether or not it would be faster by combining FCC and NTIA responsibilities, I don’t really know if I can speak to that. I do think that -- you know we are unique in the work that we do have the responsibility split, where we have the FCC that’s providing the spectrum for the commercial sector, and the NTIA that provides spectrum to Federal agencies. But we’re also rather unique to the world in terms of how our whole telecomm operation is. We don’t have state-owned telecommunications networks here. We’ve always been a private system. And we have commercial entities that the rest of the world have not have. So, part of the reason why it’s delegated the way it is is because of the nature in which we have developed telecommunications infrastructure in this country. And that is, we have private commercial networks that develop those networks.

    Our spectrum management process has been cumbersome and has gone through many phases. I know that John Stanton spoke about the lottery process that allocated spectrum previously for the cellular licenses. In the early nineties, thanks to members in the panel -- including Senator Stevens, who’s now leaving -- the Congress, in it’s wisdom, decided we need to have a better process of allocating licenses and that’s to move to an auction process. That has shown to have a lot of promise. We’ve allocated spectrum quicker there. But it’s also had its liabilities too. It’s also become a part of a budget tool that the Congress and Administration has used and imposed certain deadlines which we have -- in retrospect -- have learned that some of those deadlines have been quite appropriate.

    So it’s still an ongoing process but it is a constant struggle and a constant area of attention that myself and Bill Kennard have to pay to, and how FCC and NTIA have to coordinate. But it is a process that does work. Yes, it has some problems with is. But it does work. And we can always have better spectrum planning. That’s an ongoing process.

   SEN. ROCKEFELLER: Irwin or John?.

   MR. STANTON: I think that the issue is fundamentally that the agencies, NTIA and FCC, have different objectives. And I think that you would have to include a number of other agencies that have responsibilities for managing spectrum within the government. And I think that from my perspective, as a citizen, as a businessman, it is incumbent on the Congress to identify a policy for spectrum and to ask the agencies to implement it. I’m not sure it’s as important as to how the implementation is accomplished as it is to have clarity in terms of policy. And in my view it is one of the most important things that we can do to allocate more spectrum and make sure that it gets into the hands of companies that want to offer services to the public.

   SEN. ROCKEFELLER: Let me do one more -- Or, go ahead John, I mean Irwin, if you want.

   DR. JACOBS: I would just note that the -- there are some good things that have been done with the spectrum allocation. In particular, on both cellular and PCS there was freedom to let the market make the choice on technologies, and that in fact has given us, I think a significant advantage. And so that was one of the positive decisions. Also the PCS frequency wasn’t the first frequency available, but it was fairly close to that. And so, the process did work as far as getting that spectrum out there and making it available. I think we always have to take into account that the world changes very rapidly. There’s large numbers of dollars involved here as well as many conflicting needs. And so it is always difficult to set that policy properly. And in particular, the technology keeps changing and will continue to change very rapidly. And so nimbleness and freedom to let the market decide, I think, is an important part of our policy.

   SEN. ROCKEFELLER: Another question from a congressional office. Some argue that the percentage of US mobile wireless subscribers is lower then that of some other countries because the US wire line infrastructure is better established then in those countries. Thus, wireless is not as necessary in the US as in those countries. Please address this assertion. To the panel.

   MR. STANTON: I’d be happy to give a point of view. I think that, I wouldn’t necessarily say it is the quality or extent although, I would be the first to tell you that we have a very high quality, one of the highest quality wired networks in the world here. It has a lot to do with pricing, however. Remember that most local services in the United States are priced on a flat rate. Most fixed service are prices on a flat rate. You pay twenty dollars a month for your home phone. Most of those services overseas are priced on a measured rate. That’s created an economic incentive for individuals to substitute wireless for wired more quickly.

    I think that the second thing that I would observe is that the nature of the wired network as a monopoly was broken down here more quickly, and I think that perhaps that has created more innovation for the wired network in the United States, particularly for inner-exchange services in comparison to the later break-down of the monopoly overseas, that perhaps there was less innovation and therefore, a better environment for which competitive wireless services to compete with the monopoly wired carriers.

   DR. JACOBS: Yes, I’d like to add something on that. There is a statistic that I’ve just heard recently, that although the penetration, the percent of population carrying a cell phone, is lower here then in some countries, although not too much lower, that the usage per subscriber actually is higher. And so, we are in fact using them -- the people that have them are using them.

    There’s another aspect. The competitive situation has been increasing, as I think all of us are aware and feeling, and as a result there are a whole set of different types of pricing plans that have been going into use, and that allows calls to be made long distance, across the country, et cetera, many minutes of use at a fixed price. And I think that is causing the penetration to go up fairly rapidly. There was also another aspect that we had a very good analog system, wireless phone system. And so the transition here to digital didn’t take place as quickly as it did for example, in Europe where the analog systems were incompatible and not particularly good. So there’s more motivation. Why is that important because, again digital does allow you to get both the higher quality but also the lower cost of operation. But I think all that is progressing ahead very rapidly.

    And, one last item. There is at least one carrier here that within a local region, is offering service at a fixed -- unlimited voice service; at a fixed monthly charge -- 29.95 or some such number. And I was noticing some of their statistics that something like 70 percent of the users that they claimed were not using any wired phone so the transition for wired to wireless, in that particular case and of course it is a pricing issue, had already progressed quite far. I myself expect that over the next four or five years, the use of a wire for a telephone call is going to be exceedingly rare, and hopefully not much longer for an Internet connection.

   SEN. FRIST: Let’s go to the microphones. We’re going to give preference -- we have a lot of cards now -- we’ll go preference to the microphones. So if there is a question that you’re really want to ask, go to a microphone. But we’ll come back to the cards when there is nobody at the microphones. Let’s go to the microphone to my left.

   MR. DUSTMAN: Thank you Senator Frist. Bryce Dustman, I have a question for Greg. Can you put up the chart that you had that should all the different uses for spectrum, please.

   MR. ROHDE: This one?.

   MR. DUSTMAN: Yeah, the one that looks like the rainbow. Or the General from Cuba

    (laughter)

   MR. DUSTMAN: OK, Greg, the earlier chart you had you showed a projection of about 240 million users by 2005, is that correct? 242, somewhere around that range, as I recall. It over doubles from our current uses.

   MR. ROHDE: 210 in the US.

   MR. DUSTMAN: 210, OK

   MR. ROHDE: Projected Internet forecast for the US by the year 2004.

   MR. DUSTMAN: For the wireless. So the wireless users would double in the next five years, basically.

   MR. ROHDE: Wireless users would be in five year, 237 million.

   MR. DUSTMAN: OK, 237. So that would represent a little over 80 percent of the population of our country would have use of a wireless telephone by that point, somewhere in that range?.

   MR. ROHDE: I’m not good at math, I’ll trust you.

   MR. DUSTMAN: OK, and that would compare with about 95 percent per television and 98 percent for wired telephones, OK. What percentage of that spectrum chart right there is currently being used for the wireless spectrum?.

   MR. ROHDE: As I said earlier, in fact, the more relevant chart would have been the one that breaks down the pie chart that shows that less then one percent of all our allocations are in three GHz. So it would be a very small percentage of that one-percent that is currently allocated for PCS and cellular services.

   MR. DUSTMAN: So for wireless spectrum, it would be like point two-percent. Somewhere in that range?

   MR. ROHDE: It would be very low.

   MR. DUSTMAN: I mean, it would be miniscule

   MR. ROHDE: Yes

   MR. DUSTMAN: With the doubling of the uses, of the number of users, and all of the expanded services, is that amount -- the current that we’re using, and what you’re projecting to be using -- is that enough?

   MR. ROHDE: I doubt that the current amount of spectrum that is allocated for PCS and cellular is going to be enough to accommodate a robust third generation wireless development in this county. I think it’s -- I don’t know the answer to how much. Actually, we’re assessing that right now. That’s something that, an exercise that we’re engaged in looking with the FCC to look at if we want to develop third generation wireless. I can speak for the administration in saying, we identify -- we think this an incredibly important development. This could be -- the development of third generation wireless -- could be as historic as the invention of the printing press in turns of what it’s going to do to accessing the Internet.

    Right now, we know the Internet’s been very revolutionary in our economy. But you think about what could happen when you add broadband capability, high speed capability, and mobility to that, not only are more and more Americans going to have access to the Internet, but the Internet is going to come into more and more aspects of our lives. It’s going to come into our cars, going to come into elevators, going to come into buildings, it’s going to come into ways in which we’re not seeing it today. And I think it’s -- I’m at least assuming -- one of my assumptions is that we’ll probably will need more spectrum. At this point we don’t know how much. But we have to ask that question. And that’s why, when I ran through the charts and spoke about the dilemma that we have that’s unique around the world, and that is, we have very heavy incumbent use. When Great Britain and German allocated 3G spectrum, they used unencumbered spectrum. We don’t have that kind of, as Mr. Stanton said, greenfield out there to pick from. So we have to make very tough decisions to do that.

   MR. DUSTMAN: But basically you’d have to take that whole amount of spectrum and take a felt-tip pen, and make a couple of marks, and that would be the amount that we’re using for wireless.

   MR. ROHDER: For cellular and PCS service, if that’s what you mean by wireless, yes.

   MR. DUSTMAN: And this is an industry that at 240 users, would probably represent about a trillion dollars of potential income in 2005?

   MR. ROHDE: (laughing) I don’t know about that. I’d defer to Mr. Wheeler down there to answer that question.

    (laughter)

   MR. DUSTMAN: The point I’m trying to make and I mean, you’ve confirmed it, is that we’re using a very small fraction of our total amount of spectrum for an industry that ultimately could be in five years, seven percent of our economy.

   SEN. ROCKEFELLER: I hope microphone questioners will keep their questions short as the poor folks on the green cards have to. Yes sir?

   AUDIENCE MEMBER: I have to admit I still have a little bit of skepticism that just because the numbers show that the wireless industry is growing rapidly and Internet is growing rapidly, that mobile Internet is going to be a huge business. And I’m just wondering with that in mind -- also I have some doubts about whether or not phone calls over a wire are going to be that rare in five years either. I think that the wire industry is here to stay because it’s just too good. With that in mind, with that said, I’m wondering if anybody on the panel has analyzed the European auctions and determined -- were the prices like 35 billion in UK, about 40 billion in Germany, were those inflated or were those really realistic and how soon will anybody be actually be making a profit on 3G in Europe?

   MR. STANTON: I have found two shareholders and a potential acquirer, all of whom competed against one another in both the German and the UK auctions and I have a clear sense that the way you structure the auctions, the amount of spectrum you make available, and the rules that you apply to the incumbents will determine how much money is generated from those auctions.

    There has been a policy that the Germans and the UK government are on, the maximize revenue end of the spectrum, and they have done that in a way. I don’t think that there is a simple answer to the second part of your question. I think that bluntly, the more you charge for spectrum, the more ultimately I have to charge for services to the customers in order to get a rate of return on my investment. And so ultimately, the policies that the government makes in terms of the ways they structure those auctions would affect the prices that consumers will eventually pay. But I believe that this business is so good that attractive returns will be earned by the intelligent competitors in all of those countries.

   AUDIENCE MEMEBER: So to clarify, it sounds like, maybe those prices were inflated but we still have to wait to find out.

   MR. STANTON: Well, let me be clearer. My Western Wireless International subsidiaries is competing in an auction in Sweden for example. That is essentially a beauty contest in which we will pay some license fees, relatively nominal license fees. So, they’re going to determine who the best operator is and I would guarantee you that the prices in Sweden for wireless services for next generation will be cheaper then they will be in Germany because we don’t have to recover the investment. We may make more money as well but there will be cheaper prices. I believe that the deployment will be quicker. I believe that the quality of the services will be better in Sweden as a result.

   AUDIENCE MEMBER: Just one more to clarify.

   SEN. FRIST: Go very quickly.

   AUDIENCE MEMBER: From what I understand, the business plans in Europe are based pretty much entirely on mobile communications. There’s not really a fixed sector to it the way, for example, that Western Wireless and VoiceStream looks at here. Is that your understanding.

   MR. STANTON: The short answer is, I think that there is a robust wired business here and there. I’d agree with the earlier premise. And I think that there will be a robust wireless business. And the differences frankly, are small on the margin. I think that over the long term -- because I think that there will be significant use of both wired and wireless networks for a long time.

   SEN. FIRST: A couple of quick questions. Europe and Asia selected wireless standards early on and have therefore taken a lead over the US in 3G deployment. To what extent has our, "let the marketplace pick the standard" mindset slowed down development of 3G systems in the US versus the limited availability of spectrum.

   DR. JACOBS: Let me touch on that. First of all, it hasn’t. We will have the first 3G technology in place, in commercial use next year, ahead of the other compete technologies that you referred to which will be somewhat later. And so the US indeed, and I know there are a lot of press report and a lot of PR being put out et cetera that says, this country’s ahead, and that country’s ahead. In fact, just watch what happens. We will have the technology in place here in the US supporting high data rates, supporting more efficient use, well ahead of the other regions. And so I don’t agree with the premise of that question.

    I would just like to comment on this previous questions as well, just very briefly. This issue of whether there is a demand out there. If you can get high data rate access available wireless over a broad area, and again we expect to see that by the end of next year here, then you’ll see computer makers actually beginning to put chips into their computers and so the use of that wireless will expand rapidly. It will be used often in a fixed way. When you’re in a hotel, airport, at home. But you will always have that high data rate -- always on -- connection to the Internet. And I believe that will be heavily used fixed but that you will also be seeing some additional applications mobile that will support it. So I think that growth is going to occur.

   SEN. FRIST: Let’s go back to the microphone. And then go back to the cars.

   AUDIENCE MEMBER: Do you think that part of the solution might not be just more innovation on how to use the spectrum you have, better. In other words, there’s a lot of stuff: ultra-wide band, there’s, who knows. You might be able to polarize the signal and be able to get a whole lot more out of it. And if that is the case, those companies, are you able to do it? Or do you need other people to go and do a lot of that research and really figure out how to get a lot more out of each frequency band?

   DR. JACOBS: Well, clearly again technology does allow one to use spectrum more efficiently, and we, in this next 3G version that’s going out, roughly doubles the capacity for voice calls in the same amount of spectrum. So you gain some. It gives you the high data rate and an efficient way of handling Internet access and so you gain something there. But there are other technologies going to narrow band antennas to allow more reuse in space, in a sense, of the spectrum. With cellular systems of course, you can always add more cells. The issue, and I think that John has raised it quite properly, is that as you squeeze more and more, if you don’t get additional spectrum, there is an additional cost to try to do that additional squeezing. So, we can get a lot of capacity in the spectrum we have, but as we look forward some time we are going to be needing that for increased spectrum, or suffer increased costs.

   MR. ROHDE: I’d like to make a short comment on that as well. I think you’re absolutely correct. If looking at ways to enhance efficiently is critically important when looking at this, and it’s something that at NTIA and the role that we play as a spectrum manager for the Federal agencies, we are constantly looking at ways to try to have our constituents, the federal agencies, be more efficient in their use of spectrum. It’s part of our requirement of providing the license allocations that we do. And also, in addition, NTIA also has a research lab in Boulder, Colorado which I just visited for the first time two days ago, and we are doing a great deal of research out at that lab where we work in cooperation with federal agencies as well as with the private sector in looking at new, innovative technologies, and how they can provide efficiencies in spectrum use. I mean, there’s a reason why over 90 percent of all the allocations for spectrum use, whether they be federal or non-federal, are only using one percent of the total available spectrum. It’s all the lower hanging fruit. It’s the easier part of the real estate to deal with, and so there’s a reason why everyone’s crowded down there because it’s more difficult to use higher levels of spectrum. But we’ve constantly looked at ways in which we can identify new, innovative technologies.

   SEN. ROCHEFELLER: A question here involving television. Does the panel -- it doesn’t identify who this comes from -- does the panel recommend that Congress amend the law to more efficiently use spectrum allocated to TV broadcasters for digital conversion? Could the spectrum be used better for other applications while allowing -- I guess -- TV stations to convert to digital?

   MR. STANTON: If I may, there is an inferiority complex that our industry has as a whole that that question highlights. The television industry basically gets their spectrum historically given to them. There is spectrum that if auctioned of, would probably generate something on the order of 70 billion dollars that was given to the TV networks, or the TV industry, as a part of the HDTV decisions. And I’m sure they would have another view of it. But, we’re now trying to reallocate some spectrum in the bill that was passed about 18 months ago for the 700-megahertz auction that Greg addressed. And bluntly, that auction’s been delayed a couple of times.

    If it is held without a resolution of the incumbents that have a right to use the spectrum until 2006, it will result in lousy returns for the government in terms of the allocation because I’m not going to pay a lot for spectrum that I don’t have the ability to clearly use until 2006. And it creates a horrendous negotiating dynamic. We had to deal with incumbent users in the PCS band and I’d go specifically to Greg’s comment -- he’s absolutely right on. There are incumbent users in these bands. The government has the right, if I may use the land metaphor, to imminent domain, to essentially force the relocation of those users that for the most part got it for free, in order to promote a policy of allowing competitive wireless communications to develop and, at the same time, generate some good moneys ultimately for the taxpayers.

    And if instead, the government allocates it and forces the new user to have to negotiate with the incumbent, you will get less revenue overall from the auction because of the uncertainly of dealing with them, and services will be substantially delayed because I have dramatically less leverage over getting those incumbents to move -- some will just say no -- then does the government, in terms of simply changing the deal and shortening it.

   MR. ROHDE: I’m just going to say that that question had to come from a lobbyist. They’re the only ones in the room to suggest that Congress amend a law.

    (laughter)

    But, I don’t have much to add from what John just said. I think he gave the specifics of what generally I think is a fact with looking at the broadcast spectrum. That is, it’s politically much more complex to deal with. The political realities of looking at the broadcast spectrum as playing a role here is just much more complex then perhaps looking at other areas of spectrum.

   MR. STANTON: I spend enough money on TV advertising, I can get away with saying that.

    (laughter)

   SEN. ROCKEFELLER: Greg, does that really answer the question though, if it’s politically harder but that you’re looking at it in an emerging -- I was just saying to Irwin, I’m so sick of hearing the word robust -- this gigantic industry emerging and to say, well it’s politically very difficult therefore Congress shouldn’t, or can’t do it. I mean, that’s not really an answer, is it?

   MR. ROHDE: Well, I again certainly would not suggest to giving you direction whether the Congress should or should not amend it. But the fact, if you look back to my chart when I identified the bands for 3G, the broadcast spectrum is in that area and we do have a could of pieces now that are in the channel 60 to 69 that have been up for auction, the auctions have been delayed, and it’s just, it’s being drug out. When I say politically complex it’s just that when you’re dealing with the broadcast issues, you’re bringing in a whole host of other issue that have just made this thing very difficult.

   SEN. ROCKEFELLER: OK, well we’ve got a lot more questions up here but we try to end on time. I think all three of our panelists have been -- this is self-evident -- but incredible articulate and again, we want you to leave your evaluations, those are purple, at the door as you go out. That’s important to us. We want to know how we did today. And we’re going to have our next forum after something called the election.

    (laughter)

    So thank you for coming, and thank our panelists very much please.

    (applause)

    (Whereupon, the proceedings were concluded.)