STATEMENT 
of 
COMMISSIONER ROBERT M. McDOWELL 
FEDERAL COMMUNICATIONS COMMISSION 
 
Before the 
SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET 
COMMITTEE ON ENERGY AND COMMERCE 
UNITED STATES HOUSE OF REPRESENTATIVES 
 
April 15, 2008 
 Good morning Mr. Chairman, Ranking Member Stearns and distinguished members of 
the Subcommittee.  Thank you for inviting us to appear before you this morning to discuss the 
recently completed 700 MHz auction, known as Auction 73.   
 As you know, Auction 73 raised a record amount of revenue, over $19 billion.  The 
auction also succeeded in reallocating this valuable slice of the airwaves to licensees who will 
use it to roll out new and exciting wireless broadband services, enriching the lives of all 
Americans.     
Nonetheless, we are here today because two important objectives of the auction were 
not met.  First, the FCC failed to entice a winning bidder to build a state-of-the-art, 
nationwide, interoperable network for America’s public safety users.  Second, the FCC failed 
in its quest to attract a new national broadband provider, the much-sought-after “third pipe.”  
Today gives us an opportunity to move beyond rhetoric, analyze the lessons learned and move 
forward - together - in a constructive manner. 
Last summer’s 700 MHz Order included a plan to spark a public/private partnership 
by allocating 10 megahertz of spectrum for public safety use, known as the “D Block.”  This 
spectrum block was added on top of the 24 megahertz Congress allocated to public safety in 
1997.  The Commission created this framework after working closely with the public safety 
community, and I supported it.  Hopes were high that this additional spectrum would provide 
an incentive for a private entity to construct a nationwide, interoperable, broadband network 
all of us have been discussing since the attacks of 9-11.   
Even though public safety already had at its disposal 97 megahertz of spectrum in total 
to serve America’s approximately two million public safety users – including 24 megahertz in 
the “beach front” quality 700 MHz Band, and 50 megahertz in the 4.9 GHz Band – the 
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Commission allocated an additional 10 megahertz above and beyond what Congress gave.  
We did this to try to create an incentive for the private side of the public/private partnership to 
invest risk capital to build a nationwide public safety network suitable for 21
st
 century 
challenges.  In the absence of congressionally-appropriated funding for this network, the 
Commission concluded that this type of public/private partnership was the best way to jump-
start funding and construction. 
I have met with a number of parties since the anti-collusion prohibitions were lifted.  
Early critiques of the Commission’s efforts reveal that potential bidders were deterred by 
onerous build-out and service requirements that required the eventual licensee to incur 
massive costs in an atmosphere of extreme uncertainty regarding how many, if any, public 
safety entities might actually sign up as paying customers.  I am eager to put this matter out 
for additional public comment and also to hear from Congress regarding new ideas.   
A positive attribute of our order was the band plan for the remaining commercial 
blocks of the 700 MHz spectrum, which I also supported.  The band plan we established was 
comprised of four spectrum blocks of various sizes (ranging from six to 22 megahertz), each 
of which was divided into a mix of geographic area sizes, including Cellular Market Areas 
(CMAs), Economic Areas (EAs), and Regional Economic Area Groupings (REAGs).  The 
plan was advocated by a broad array of interested parties, including possible new entrants, 
technology companies, as well as existing wireless license holders.  I was hopeful that the 
band plan, minus the open access requirement, would provide new opportunities for a wide 
variety of technologies and business plans.   
With respect to the open access condition, which was imposed on the large, 22-
megahertz portion of the band known as the “C Block,” I acknowledged that while we could 
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agree on the destination – a market that provides consumers with device and application 
portability – my colleagues and I could respectfully disagree about the best path to take us 
there.  At the same time, I was disappointed that the majority did not try to work with industry 
to forge a consensus solution rather than rush to regulate without thinking through possible 
unintended consequences.   
I cast the only dissent against the open access requirements because the evidence in 
the record told me that the market was already headed toward open access through natural 
evolution.  I also did not think that the plan would achieve the advertised goal of attracting 
new broadband competition.  Additionally, as I pointed out in my dissent, I was concerned 
that larger carriers would avoid the encumbered C Block and outbid smaller players in the 
smaller, unregulated spectrum blocks.  Sadly, it appears that my fears proved to be correct, 
but I wish I had been wrong. 
Here is what we know: the price for the “open access” C Block was 77 cents per 
megahertz pop, and it was purchased not by a new entrant, but by a large incumbent wireless 
carrier.  On the other hand, the average price of the unencumbered B Block was an 
unprecedented $2.65 per pop.  Even the A Block, unencumbered, but which some had argued 
was “less desirable” because it neighbors with higher-powered broadcast operations and thus 
might be susceptible to harmful interference, went for an average of $1.13 per pop.   
The bottom line is that the smaller unencumbered blocks sold on average for almost 
three times more than the larger, more regulated block.  Large and small players have already 
commented that the encumbrance on the C Block had an effect on pricing because bidders put 
a premium on the clean spectrum.  Acting in an economically rational manner, large 
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incumbents outbid many smaller players in smaller blocks.  Smaller players had nowhere else 
to go, all while no new broadband provider emerged.   
Comparing the numbers of licenses won with bidding credits in prior auctions with 
those won in Auction 73 is imprecise at best.  The fact is, in Auction 73, more than half of the 
spectrum (32 of the 62 megahertz) was available only in nationwide slices.  The 10 megahertz 
D Block was carved into a nationwide license at the outset.  And, although carved into 
REAGs, in practical terms, the 22 megahertz C Block was available only as a nationwide 
license due to the combinatorial package bidding allowed in that band.  Thus, the open access 
condition aside, the C Block was not a realistic option to either those regional and smaller 
entities seeking to bolster holdings in an existing service area, or to those potential new 
entrants that would need a good deal of bandwidth, while desiring to purchase more 
conservatively.  As a result, the 379 licenses won with bidding credits in Auction 73 
overwhelmingly comprise only the smallest markets as measured by depth (the amount of 
megahertz afforded in each), breadth (the geography covered and pops served), or both.         
In their defense, I do not think that my colleagues intended these consequences to be 
the end result.  And perhaps that is the point: the lesson we can draw from this experiment-
gone-awry is that attempts to over-engineer markets always produce unintended consequences 
and costs – costs that ultimately consumers will pay.  The auction’s legacy may be less 
innovation and less competition, not more; and consumers may be short-changed as a result.  
But we may never know for sure. 
Make no mistake, I support licensees rolling out open networks if consumer demand 
so warrants.  Nothing under the Commission’s prior rules has prevented this development.  In 
fact, the biggest unwritten story is that nascent device and application portability were already 
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coming to market long before the FCC got involved last summer.  Take, for example, the 
efforts of two carriers that, in 2006, launched dual-mode cellular-Wi-Fi handsets designed to 
make voice calls on cellular GSM networks and at Wi-Fi hot spots - both at home and in 
public - using voice-over-Wi-Fi technology, with seamless handoff between the two types of 
networks.  Or the November 2007 introduction of Android, a Linux-based software stack that 
consists of an operating system, middleware, a user interface and applications, which had 
been in development since 2006.  Or last fall, and after more than a year in the making, even 
the two largest wireless carriers each announced initiatives to allow customers to use any 
wireless device and to employ elective applications on their respective networks.  In short, 
consumers were already starting to breach the walled gardens of yesterday well before the 
FCC rendered its mandate. 
It is also worth briefly noting that, even now, it remains unclear as to what “open 
access,” in the form of a government mandate, means.  It may be that the winning bidder will 
define this term in the end, but that remains an unanswered question for now.  Then again, 
many important questions remain unanswered, and that is why we are here today: to try to 
arrive at some answers so we can move forward together.   
Conclusion.  At the end of the day, I respectfully submit that the lesson learned from 
this auction is that we policy-makers should proceed mindful of the unintended consequences 
of our actions, especially as technologies and consumer tastes evolve.  Again, thank you for 
having us here today.  I look forward to working with you on these and many other 
challenges. 
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