 My name is Brent Scorup and thanks for having me today here. Hopefully you want to learn something about spectrum. So I'll be taking you through little spectrum 101 to begin with a little bit about spectrum history, how we got here, talk about spectrum policy today, some bills that are out there, and finally what spectrum policy will look like in the future. And this is becoming a big topic. Senator Thune just released a bill with Senator Nelson last week, I believe, about this. So what is spectrum? Spectrum is the medium through which electromagnetic waves travel and what the government, what the FCC does is it allocates spectrum licenses out to people and so a license is a right to exclude others from that bandwidth. So for example, if the FCC auctioned off a license for spectrum from five megahertz to 15 megahertz, 10 megahertz band in the Washington DC area, if I won that license, I would be the only one that could put equipment that transmits on those frequencies. No one else could without my permission, people could buy the right to have their own equipment there, but I have the right to exclude others. It also means from other spectrum bands. So in Washington DC, if someone had zero to five megahertz, they could have their equipment there from five to, excuse me, from 15 to 20, they could have their equipment there. And also my five to 15 megahertz, another licensee could have them Baltimore or New York or whatever. So spectrum is scarce, not everyone who wants it can use it at the same time. Like real property, it can be bought, sold, leased, divided, subdivided and most people don't realize you deal with spectrum every day. So the FM dial, if you wanted with those numbers mean 88 megahertz to 108. If you're listening to the radio on your commute, that's the frequency, so that's the megahertz. The FM radio dial is 20 megahertz, 88 to 108. Mobile carriers have, on your smartphones, you're transmitting on the airwaves from about 700 megahertz to 3,500 megahertz, 3.5 gigahertz. And the carriers have various, they don't have the entire span, but they have various bands in there. Most popular Wi-Fi band is at 2,400 megahertz. It's 100 megahertz wide band that is used for Wi-Fi on the most popular band. So who's seen this chart before? Few people. This is the United States Frequency Allocation Chart. All these boxes with text in it, those are not who owns the spectrum, that's what services are allowed. And so at the bottom top, you've got the low band spectrum, the very long wavelengths, and at the bottom right, it gets higher as you go left to right, and at the bottom right, you have very high frequencies, and you can share more, that's why there's more boxes down there, you can share the high frequencies. And within there are all kinds of services, hundreds of services, and so basically on every part of the US, there are dozens, potentially hundreds of wavelengths being used in this room at this time. This is another chart, this is from GAO, basically showing the same thing. On the far left hand side on the bottom, you've got the low frequencies, on the far right you've got the high frequencies, this is just very compressed. They also blow up a section of the spectrum, that's, this is called the beachfront spectrum, it's called beachfront because this is very high valued, everyone wants it, government, commercial, and GAO puts a few illustrations of what services are in there. That's where most of the cell phone carriers are, you've got some broadcast TV, but also a bunch of government services. So there's increasing demand for spectrum throughout, but especially the beachfront spectrum. It's a very valuable input for government, for commercial government users, I mentioned some of the applications, GPS, communications, public safety. On the commercial side, wireless broadband is driving most of the demand, so as recently as 2008, only 10% of people had smartphones. Today's about 70% of people in the US have smartphones, and smartphones are a huge consumer of data, especially video, video is a huge consumer of data. Actually voice is not, doesn't use much data, but video does, and that's driving a lot of consumer demand, and that's a picture of a cell phone tower that you see in the city or out in the country, and that's what those are. So demand is increasing, but supply is constrained by physics and by policy. So a fiber optic cable, which often wires those cell phone towers, has about 2,000 times the capacity of all the wireless spectrum that's allocated for the wireless carriers. So basically you have a 2,000 lane highway going down to one for wireless. The average cell site in the United States is shared by about 1,000 users at the same time. And that's a problem because all it takes is a few people watching high definition Netflix to consume all the bandwidth on that tower, it's just a handful of people. So we need more spectrum. It's not always been allocated efficiently, as I'll point out in a minute. So how do carriers increase spectrum? It's not infinite, as I said, but you can increase efficiency, you can use it more intensively. So you can upgrade technology radios, this is what's happening. Our phones are now 4G LTE, which is an upgrade from previous 2G and 3G a few years ago. Long-term evolution, it's a standard, it stands for long-term evolution. It's a set by standards body, a global standards body, and just so equipment suppliers know how to design the radios, so that works around the world. Good question. You can increase capacity by building more towers. As I said, there's a lot of sharing going on for each tower, hundreds of people for each tower. If you build more tower near another one, instead of it being shared by 1,000 people, it's shared by each one shared by 500. And so you've increased capacity that way. So, and a lot of people don't realize this. So a substitute for more spectrum is building more towers. But building towers is expensive. FCC estimates about a half million dollars total cost to have a new tower. This is something policy makers start to look at, how to make it easier for companies to build infrastructure, to build towers. Senator Thune has a bill that requires agencies to streamline their permission to allow carriers to put towers up. So that's one thing you can do, and you can also buy more spectrum. Now, building towers, buying spectrum are both very expensive, and we'd like to make it as cheap as possible. I'd like to impress on you that spectrum is not sexy's topic, but it is the lifeblood for a lot of these technologies down on the horizon. Inefficient spectrum use is a national problem. I'll talk in a minute about the history and why that is. But, big part of it is the US government holds about 60% of it, of the beachfront spectrum, likely worth hundreds of billions of dollars. Economists have estimates about what the value is to free some of that up. One study says freeing up just 10% of that would result in a trillion dollars of economic value. Harold first got Roth, who was a former FCC commissioner, he's an economist, he's at the Hudson Institute in town, estimates that inefficient spectrum use exceeds trillion dollars. So we're talking real money here. So more spectrum means more innovation. And as I said, it's expensive to get spectrum, it's expensive to build infrastructure. By freeing more of it, you make it easier for companies to experiment, deploy new things, internet things, reliance spectrum, drones, driverless cars, augmented reality, where you might have glasses that give you real-time information as you look around. These are all on the horizon. I mean, some of these are here today. Drones are starting to get out, and they're using this long-term evolution standard in a lot of cases, but it's costly to deploy. It's costly for carriers. They don't always want to give up spectrum that their Netflix viewers want. So the more the better. And it does drive technology by freeing it up, which is why I'm here talking about the importance of it. So how did we get here? In the 1920s, spectrum was not very regulated. Basically, if you were, there were some maritime applications, ship-to-shore communications, and some amateurs experimenting with it. But in the early 1920s, technology improved, broadcast radio became possible. You put up a tower, blast a signal out, and companies actually started doing this so that they could sell radios to people, and that's how it started. So in the early 1920s, radio broadcasters started, hundreds started popping up. And basically at the time, all you had to do was register your use of the frequency in a particular area with the Department of Commerce. Commerce would sign off and it was yours. Part of the problem was, well, from Congress's point of view, courts started recognizing these licenses as owned by the people who got licensed. And there were a lot of reasons, but one of the reasons Congress in 1927, nationalized, I should say, socialized all the spectrum in 1927, gave it to the Federal Radio Commission, was courts were starting to recognize property rights to spectrum. And so it's the first paragraph of the Communications Act says there are no vested property rights to spectrum. It's owned by the American public, administered on behalf of the public by the government. So a few years later, the Communications Act created the FCC, which superseded the Federal Radio Act and took over their responsibilities. So, spectrum policy then was, you'd have administrative hearings about how to allocate spectrum, so it was technology-improved. You could use more spectrum. Broadcast TV came on the scene. You had public safety using these communications networks. The FCC would listen to the public. They would say, what spectrum do you need? How much do you need? And they would have hearings and give it to the most, what they considered the most beneficial system. They would give it for free. These administrative hearings were called beauty contests. You're rewarded by, if you made the case, that you deserved it. Rollercoaster, a few decades later, famous economist, one Nobel Prize wrote an essay, one of the most cited essays in economics. Well, this one was Federal Communications Commission. He looked at how the FCC was doing this, giving away spectrum for free and made the point, spectrum is scarce. That's not a reason to regulate it. We don't, grain is scarce, beef is scarce, and these are allocated by the market system. He pointed out, markets could probably handle spectrum allocation as well. And he was not treated well at the time when he said this. There was famous, there was congressional hearing and Senator Asif, this was a big joke that he was making. And, but eventually he won the day. 1993, Congress finally allowed the FCC to auction off spectrum to its highest valued use. So the idea is whoever values it most will bid the most and deploy it in ways that are efficient. So auctions are allowed, it's gotten a lot better. I will say, the spectrum chart of all the allocations, a lot of it is still the legacy services that were given away for free. And there are secondary markets, so a broadcaster today that was given it free in the 40s sells it for a lot of money today. So it's not free for the current licensees but they're also not paying the full market price. And that's the commercial side. The federal side, federal spectrum is administered by the president. He delegates that responsibility to the Department of Commerce and the NTIA within the Department of Commerce. But in practice, the agencies have a lot of discretion over how they use their spectrum allocations. And it's hard to find how federal allocations work but it looks like the NTIA generally did the same thing the FCC did, what do you need? Make your case and it would allocate it that way to the agencies. So federal spectrum is administered by the president, non-federal spectrum administered by the FCC. It's not just commercial but also state spectrum, state public safety, utilities, this sort of thing. A decision about whether spectrum is federal or non-federal is decided informally by the NTIA and the FCC. So some of the history, we'll talk about spectrum policy today, here's that chart again. And in a minute you'll see why there's a lot of interest in spectrum. If you keep your eye on that black circle, last year those two white slivers of spectrum sold for over $40 billion. I couldn't draw the slivers thin enough actually with the illustrator but that amount of spectrum sold for $40 billion. That band, that long band is the so-called beachfront spectrum, the most valuable stuff. So that was last year, the auction concluded in January 2015, AWS three auction. The big bidders were AT&T, Verizon, Dish and T-Mobile. 15 megahertz spectrum. $7 billion of that was earmarked for a nationwide public safety network. $20 billion of that went to pay down the debt. So very valuable, there's a lot of demand here. Here's that chart again from GAO that kind of blows up the beachfront spectrum. So now I'm gonna zoom in on that beachfront spectrum which I've boxed there, I've divided it into three so it fits on the page. And I'll show you those slivers again on the bottom left, you can kind of see them. That's what's sold for $40 billion in the beachfront spectrum. So use of the beachfront spectrum. There's about 3,200 megahertz total depending on how you count. About, and I'm approximate with all this because it's not always clear what you count but about 20% is used for mobile broadband. About 10% is used for broadcast TV. So these are your TV broadcasts. If you don't have cable or satellite and have rabbit ears antennas, ABC, NBC, PBS, that sort of thing that's what's using about 10% of the beachfront spectrum. The issue is, and the FCC realizes this, not many people watch broadcast TV anymore. The vast majority of people have satellite or cable. So, and I'll talk about it in a minute, they're trying to buy spectrum from broadcasters and resell it to the wireless carriers. And finally, the big use of the beachfront spectrum, about 60% has a dominant federal use and that's according to the presidential council of advisors on science technology. And government agencies will point out correctly they exclusively hold only 18%, approximately 18%. But as PCAST says, the agencies aren't great at sharing spectrum. So the other percentage is shared between non-federal and federal users, but the federal use effectively, PCAST says effectively precludes commercial use of that spectrum. So you'll hear these different numbers. Agencies will say 18%, others will say 60. That 60% comes from the fact that you can't really use the federal spectrum that well when you're sharing it with them. Because they have a lot, there's a lot of interest in this. The values that are attributed to it, NTIA is analyzing at the direction of the president about 30% for possible sharing and relinquishing for commercial use and broadband and wifi. So I mentioned 60%, I've blacked out where the federal users are and it looks about 6%. You can't take it too literally, but the blacked out area is about what's, cannot be used very easily for commercial use. So the beach front, as I said, about one to 2% of the beach front spectrum sold for $40 billion last year. There's a lot of value to be squeezed out of that. It's the idea, but 6% is not available for commercial use, wireless broadband use. Dozens of agencies use it. They've got thousands of assignments from the NTIA that I've listed the big nine agencies that use it there. DoD is a big one. And getting back to COS, some markets allocate scarce things all the time. The issue here and the economic concern is that spectrum is underpriced for agencies. So it's underused, presumably, it could squeeze a lot more efficiency out of the federal spectrum. It's not entirely freed agencies. They pay $122 a year for every assignment, but that's really underpriced for what they hold. And channeling COS, agencies purchase other things that approximate the market rate. So vehicle fleets, labor, pencils, paper, office space, somewhere around the market rate. And the idea is you could also do this for spectrum. So some recent spectrum action and actually this first one, the incentive auction is not a bill. It's a law in 2012, Congress passed an act allowing the agency to do what's called the incentive auction. And so basically, and this is going on next month, the FCC will go to the broadcasters and say at what price can we give you money to either stop broadcasting or compress your signals, share with other broadcasters and free up spectrum. So they'll do that next month. And then over the next few months, they'll pack everyone together and clear the spectrum and then go back to the carriers and say how much will you pay for all the spectrum? So they want to buy low, sell high, government pockets, the middle is very complex. And literally the global countries are watching and see how this goes because a lot of countries are dealing with this, they have legacy services that aren't as popular as they once were and they want to figure out how to get it into carriers hands. So it's complex, we'll see how it goes. Everyone's wishing for the best, but it's not clear how this will go. So one bill, and I've got a few bills here. This is not all of them, but some more interesting proposals I've seen. The Federal Spectrum Incentive Act from representatives Guthrie and Matsui. One interesting idea that they have is allowing agencies. So what we've been doing is going to NTIA saying, what spectrum can you spare? NTIA says we can spare this. Agencies will clear out that spectrum, it'll be auctioned off to the carriers. So the Guthrie and Matsui bill says, well when that's auctioned off, I mean agencies don't benefit, I mean they have to go through all this hassle and what's in it for them. So to incentivize them to give up more spectrum, they propose giving the agencies a 1% cut of the auction proceeds to use for sequestration cuts. It's an interesting idea. I think 1% is probably inadequate to get a lot of buy-in, but I think this is a good direction to go. The Wireless Innovation Act from Senator Rubio has an idea that NTIA will track the opportunity cost of spectrum. So just to get numbers, or heads around what agencies are using, give some proxy of what agency's spectrum is valued at. So agencies have to report that, say our spectrum is worth so and so million and it'll just give Congress everyone a better idea of how it's being used and whether they can use alternative systems or share with other agencies and that sort of thing. The Mobile Now Act, which I think came out last week from Senator Stoon in Nelson, it's got a lot in there, but some of the highlights, it would make 255 megahertz available for wireless broadband in four years, under six gigahertz, so not quite the beach front, which is under three gigahertz, but it could be some beach front as well. That bill also has provisions that would make it easier for wireless carriers to deploy on federal land, like I mentioned, to streamline the process, get applications and standard fees. It also requires the Department of Commerce to get a report about how to incentivize agencies to use spectrum more efficiently and get them to share or relink a spectrum. And I'll close by talking about a few of those things and what we can expect to see in the future and what might come out if that bill passed, what Congress would say about how to do that. So in the future what we see, I've focused a lot on federal spectrum just because there's a lot of beach front is in federal hands and I think policy will focus on federal spectrum, what we've done for the last 15 years or so. So like I said, go to NTIA, ask what can the agencies spare? NTIA says our agencies compress, go to some other band or some other alternative. Then that spectrum is auctioned off. So clearing the agency is auctioned off. That's worked fairly well. It's getting tougher because agencies are getting more compressed and more compressed. In 2004, to alleviate some of that pressure from agencies, Congress allowed some of the auction proceeds to go for the relocation exercises that agencies were doing and the middle class tax relief act in 2012. So agencies, even with that, we're saying it costs a lot to plan these relocation activities. And so Congress also gave them money in 2012 for those planning costs. I expect we'll also see more commercial federal geographic sharing and this idea is, so geographic sharing, if say Tennessee Valley Authority, which has communication systems, is operating Tennessee, they're not using the spectrum in California. And so the idea is you could auction off the spectrum in California to wireless carriers and as long as they avoid Tennessee, there's no problem. So geographic sharing is possibility. It's not ideal because carriers like to have nationwide footprints and it makes it more complicated for phone use. I mean, they have to, it's much more complex, but it is an option and it's been done in the past. Densify networks will be a big thing. This is a big part underlined the Thune bill is carriers will densify networks. So like I said, a thousand carriers share or a thousand people share every cell phone tower, build more towers, get more infrastructure out there. We'll see more of that because you can use more spectrum more efficiently when you reuse spectrum in that way. So we'll see a lot of that, especially you get much higher capacity. Policymakers are looking at the very high bands where you get much more capacity, but it doesn't penetrate walls as well. So there's trade offs either way. You know, one proposal that's popular and this was part of the PCAST proposal is unlicensed dynamic spectrum sharing. The idea here is, and it's been proposed for years, but there's a lot of complexity. The idea is take Tennessee Valley Authority in Tennessee, instead of just allowing carriers or broadband for Wi-Fi device makers only in California and around Tennessee, they could be in Tennessee, but the radios, they would have cognitive radios that when they sensed the federal agency operating, it would stop transmitting and prevent interference. Engineers are working on it, very smart people are working on this. It's a long way off, PCAST says doing this would take decades fully implement. And so it's a possibility. There's a lot of people excited about it. You'll probably hear this if you talk about spectrum policy with people, especially agencies are excited about this, but it does inject complexity and the technology has a ways to go. And you also have, I've got a note here, the legacy device problem. So Wi-Fi is non-licensed technology. As long as it's a low power, you don't need to go to the FCC and get formal permission, and you can deploy Wi-Fi everywhere. The problem with someone like, and they're trying to get around this problem, so you've got all these Wi-Fi routers out there, but you can't really have a new service come in there because you're gonna have a lot of upset Wi-Fi users. So the problem is, there's never been allocation of unlicensed spectrum because you don't know where the devices are. You can't clear people out whereas you can with licensed spectrum. So this is a problem I'm trying to deal with. You may have heard of the TV White Spaces kind of experiment that the FCC is doing where they're forcing the unlicensed users to check a database, and there'll be a list of these devices and where they are. So that's one possibility. We'll see where that goes, but again, this is at the beginning of stages. One idea economists have proposed is GSA for spectrum. So this idea would be, there's an agency that holds all federal spectrum, kind of like GSA rents out office space to agencies. The GSA for spectrum would lease out spectrum to the agencies at approximate market rates, and then they would optimize their networks, have the best technology, that sort of thing because they're paying for it. Again, this is a long-term idea. It would take a while. I mean, this is pretty abrupt change in how things are done. One, and I'll conclude with this. One proposal I like, and it's not my idea, but I wrote a paper about it. You'll find summaries around. So I'll plug that. It's a proposal from FCC Commissioner Rosenwursel who's on the FCC now. It's called overlay auctions. So the idea here is, use market forces to incentivize efficient behavior. So take the Tennessee Valley Authority, they're operating in Tennessee. You would auction off maybe a regional, or say a regional Southern license. So a carrier would bid, would buy a license for the entire South, but they would be told, you can't operate in Tennessee until you've convinced the agency to sell that spectrum to you or condense their activities in another band. And you can pay the agency. You can pay them, you can give them equipment if that gets them to get out. So you'd have regional license, you'd also have the exclusive right to deal with the agencies who are in certain bands in certain locations. When Commissioner Rosenwursel proposes, I thought that was interesting. So I did paper about it. It turns out these overlay licenses have helped free, these have not been done on the federal side. Let me be clear. They've been on the commercial side though, where you have legacy services, utility companies. You could use this for broadcasters where the carriers bid, they bid for a license and then they pay the others to get out. The issue on the federal side, a big issue is Ms. Lane's Receipts Act, which says basically, agencies can't go selling their stuff and pocketing the cash. I mean, there's problems with that. So as a general policy, that gets in the way that might need to be modified or that would need to be modified for this proposal. But as I say in my paper, this is not unheard of. Actually Congress allows, for instance, the VA can sell hospitals and or portions of hospitals to commercial hospitals. And they do that. So there are these carve outs and a few years ago they allowed, when military bases closed down, they allowed DOD to sell military bases and keep the or portion of the sales. So it's not unheard of. I think it's an interesting idea. I hope you guys find it provocative and you can read my paper for more on that. And so just to wrap up, I went through some Spectrum 101, talked about the history, why we're here. Spectrum policy today, why this is a big deal, that big auction last year, $40 billion. There's a lot of pent up demand. There's a lot, consumers want more mobile broadband. They want more, they want more TV options. They want more broadband options and you can accomplish that by freeing up more Spectrum. And finally I talked about Spectrum policy in the future, some pending bills and why I think overlay auctions are worth considering. And with that, I'm happy to take questions and my email address is up there if you ever wanna chat. And yeah, I have to take questions.