1 National Spectrum Managers Association Spectrum Management 2004 Diane Cornell Vice President, Regulatory Policy CTIA-The Wireless Association May 19, 2004

2 CTIA- The Wireless Association CTIA is the international organization of the wireless communications industry for both wireless carriers and manufacturers. Membership in the association covers all Commercial Mobile Radio Service (“CMRS”) providers and manufacturers, including cellular, broadband PCS, ESMR, as well as providers and manufacturers of wireless data services and products. CTIA is the voice of the wireless industry - representing its members in a constant dialogue with policy makers in the Executive Branch, the Federal Communications Commission, and in Congress. CTIA’s industry committees provide leadership in the area of taxation, roaming, safety, regulations, fraud, and technology.

3 Commercial Mobile Radio Service- Over 164 Million Subscribers Today. Wireless Subscribers

4 CMRS Delivers Digital Service Over 140 million digital subs at year-end 2003

5 Over 1 Trillion Minutes-of-Use by YE 2004

6 CMRS Track Record for Customer Service and Innovation Hard to Match providers per market –“A regulated duopoly” Avg. monthly bill - $ million consumers –5% penetration Service on local/regional analog networks Data Rates of 9.6 kbps Limited internet access Limited number of mobile data capable devices 2003  5 providers per market for 83% of consumers  Avg. monthly bill – $ (in 1993 $$s).  159 million consumers  54% penetration  92% digital nationwide networks  Data Rates up to 500 kbps  Full Internet Access  Over 140 million mobile data capable devices

7 Spectrum Management: Procedural and Structural Reform Some ideas for procedural and structural reforms to improve efficiency of spectrum allocation process: –Develop a “rolling” long-term spectrum planning process. –Create an “independent review” mechanism similar to the Base Realignment and Closure Commission (BRAC). –Designate an entity to contribute an independent voice on difficult sharing/ interference and technical decisions. –Improve U.S. participation in the international spectrum process. –Create a “relocation fund” from auction proceeds.

8 Spectrum Management Reform NTIA should encourage more efficient use of spectrum by those commercial and Government users that are currently not subject to market forces or discipline. The FCC and NTIA should avoid creation of unlicensed spectrum “underlays,” which could create serious interference problems for licensed users. Any spectrum or network reliability planning relating to Homeland Security or public readiness needs to be performed at the Federal level to ensure an uniform, national response during terrorist attacks or natural disasters.

9 Issues with Upcoming Blocks of “New” Spectrum Advanced Wireless Service –Allocation of 90 MHz of spectrum in MHz and MHz band for advanced wireless services. –Need Spectrum Relocation Bill to be signed into law. –The FCC and NTIA proceeding will need to be completed. –Auction timing? MDS/ITFS rebanding –Decision expected this summer. –Will create opportunity for secondary market purchases. Nextwave spectrum –What service rules apply? –When will auction be held? Reallocated MSS spectrum –Will it be allocated for CMRS? –What blocks will be made available and what service rules will apply? –“G” block controversy MHz / MHz.

10 Flexibility: Two Perspectives PROPERTY RIGHTS MODEL Licensees who buy their spectrum at auction should be given property-like rights to do whatever they like within their assigned spectrum, provided they do not interfere with other licensees. COMMONS MODEL License would be subject to efforts by the FCC to improve the efficiency of utilization of the spectrum by allowing additional “flexible” uses in assigned spectrum. –Possibly results in additional services allowed to be provided in the licensee’s spectrum.

11 A Proposed Framework to Analyze Requests for Flexibility in the Use of Spectrum First, determine whether reallocation of the relevant spectrum band is preferable to granting the requested flexibility. If reallocation is not appropriate, determine whether the additional flexible rights can be auctioned, subject to appropriate service rules.

12 Secondary Markets Secondary market mechanisms will help ensure that limited spectrum resources are used in the most economically efficient manner. CTIA supports: –The FCC’s proposal to forbear from requiring prior approval of certain transfers and assignments. –The FCC’s proposal to expand spectrum leasing.

13 Receiver standards –The FCC should rely primarily on market incentives and voluntary industry programs, rather than a regulatory regime that would subject all receivers to a set of mandatory standards. –The FCC should not impose unnecessary regulation where competitive markets and industry cooperation have been successful in improving the interference immunity of wireless equipment. –For some spectrum service users whose markets are not driven by profit, such as public safety users and TV broadcasters, receiver requirements or standards might be appropriate.

14 Interference Temperature The use of CMRS bands has been highly efficient. The systems in CMRS bands are now designed to operate down to (and in some cases below) the noise floor. Underlay operations in CMRS band will cause harmful interference to licensees. The introduction of ITemp-based systems in CMRS spectrum would adversely affect existing consumer services by reducing the coverage available from mobile networks, increasing dropped call rates, decreasing the voice quality of service, and limit data throughputs. The record in the ITemp proceeding was overwhelmingly opposed to the concept, and most commenters emphasized the many unanswered questions in the Notice.

15 CMRS and Unlicensed CMRS carriers view unlicensed as a compliment to… but not a substitute for licensed mobile offerings. Many are building unlicensed into their business models. Concern with unlicensed underlays (the interference temperature model). But supportive of unlicensed in separately allocated spectrum when demand is demonstrated.

16 The Unlicensed Hype is Overdone… But unlicensed offerings today do not offer high-speed access to the Internet, they only provide local area “hot spot” networks. –They need some other means of connecting to internet access. Starbucks, for example, needs to buy T-1 access lines to offer its hot spots, which affects the economics.

17 Licensed Services Already Offer Broadband Mobile Access EV-DO already deployed in two cities, many more in 2004/2005. Speeds comparable to DSL and Cable Modem. Rides on existing CMRS infrastructure. Other licensed technologies are on the way.

18 Licensed Uses Should be a Higher Priority for Most New Spectrum Allocations than Unlicensed Uses Licenses provide certainty of spectrum environment needed to stimulate investment and innovation. Allocations for unlicensed uses are appropriate, if demand is demonstrated, and it can be shown that there is a greater need for unlicensed than licensed uses in the target band. Unlicensed underlays, however, raise serious technical, economic and practical concerns.

19 Economic Concerns with Unlicensed Underlays Government-imposed underlay rights perpetuate the command-and- control that the FCC has recognized as flawed. –These types of government-imposed rules are not technology neutral, and distort innovation and investment incentives. Regulation generally is not needed to create underlay rights and promote efficient use of the spectrum. –From the perspective of consumer welfare and economic efficiency, allowing primary users to sublicense via secondary markets would be better than unlicensed underlays. CMRS spectrum is the wrong place to experiment with underlay rights. –Unlicensed underlay devices could cause interference to incumbent licensees and would prompt uncertainty that would stifle innovation and hamper full use of spectrum.

20 Spectrum Managers Must Consider Opportunity Costs of Allocating Spectrum to Unlicensed Instead of Licensed Operations Licensed CMRS offerings have a proven track record. Unlicensed offerings have an important role, but beware the tragedy of the commons’ potential to curb innovation. International harmonization enables manufacturers to achieve economies of scale, whether for licensed or unlicensed, and should guide allocations.

21 Questions? Diane Cornell Vice President, Regulatory Policy