Catherine J. K. Sandoval Director, Federal Communications Commission, Office of Communications Business Opportunities Speech to Auctions '98 Conference Wednesday, June 24, 1998 Welcome Good Morning. On behalf of the Office of Communications Business Opportunities, I welcome you to the Federal Communications Commission's Auctions '98 Conference. First, I would like to thank the dedicated staff of OCBO who worked to bring us together today to discuss opportunities for small communications businesses through FCC auctions. I would also like to thank the FCC Chairman, William Kennard, and his staff, all of the FCC Commissioners, the Wireless and Mass Media Bureaus, the Office of Plans and Policy, the Office of the Secretary, the Office of Legislative and Intergovernmental Affairs, the Office of the Managing Director, and the Office of Public Affairs who worked to make this Auctions Conference possible. It is an honor to serve as the director of OCBO and work with people dedicated to serving the public interest. OCBO is the principal small business policy advisor to the FCC Chairman and Commissioners. OCBO's monthly mailings, which reach more than 2,600 businesses and individuals, provide information on FCC rulemakings and activities affecting small businesses. OCBO serves as the primary contact at the FCC on issues affecting small businesses. Our mission is to assist you, the small communications business, in your dealings with the FCC. Opportunities in Spectrum Auctions Last month, the Commission released the Third Annual Commercial Mobile Radio Services (CMRS) Competition Report. As of December 1997, over 55 million mobile telephone subscribers were reported, an increase of 25.6% from 1996. Over 20% of the U. S. population owns a mobile phone! The mobile telephone industry is earning over $27.5 billion a year. At the same time, the average monthly bill for the customer continues to decline. The industry is experiencing tremendous growth while consumers are enjoying the benefits of lower prices and more choices. The Yellow Pages Publishers Association recently conducted a study of the fastest- growing business listings in the United States. The fastest-growing categories include: cellular telephones, collectibles, consignment services, pawnbrokers, karate lessons, diving equipment, and marriage counselors. I think this means that we are a society of mobile, workaholic, recycling, adventure seekers who secretly desire stability. It also means there is opportunity in serving this mobile society that really wants to stay in touch. There have been many exciting technological developments in the industry as well. Not only can you travel from state to state with the same mobile phone, but it is also possible to travel in many parts of Europe, Latin America, and Asia with a single mobile phone. Such technologies will prove invaluable to business travelers by eliminating the need to rent or even purchase a mobile phone when doing business overseas. The pent up demand for mobile phone service abroad demonstrates the potential to capitalize on the opportunity to serve such markets. In Brazil, for example, there is a waiting list for cellular service of over 8 million people. A large number of Brazilians have paid $1,500 for a satellite phone that will not even be operational for another year. This month, BellSouth began offering wireless service in Sao Paulo and Recife, Brazil. Because the demand for wireless service is so high in that region, the company was forced to use a lottery system for selecting customers. Within the first eight days, BellSouth signed 144,000 customers in Sao Paulo alone. Consumers are also taking advantage of a range of services. The paging and messaging industry has seen tremendous growth not only in revenues, but in services. In 1996 alone, the total number of pagers in service increased by 17% to just under 50 million units. Now it is possible to receive e-mail messages and stock quotes at the press of a button on your pager. Paging and messaging service providers have also brought consumers two-way and voice messaging; and new services are being developed. The market for wireless e-mail and Internet services is expected to reach 11 million customers by 2001. Importance of Connecting People Through the Commission's deregulation efforts, companies and consumers alike are reaping the benefits of increased competition. It is our goal to put spectrum into the hands of those who will use it in a way that best suits the needs of the public. I would like to share with you the story of a small telecommunications business called Gila River Telecommunications. Darrell Gerlaugh grew up on the Gila River Indian Reservation in Arizona. In 1969, when Darrell was a young child, his grandfather fell ill. Because, at the time, the reservation had no telephone, Darrell's uncle had to walk to the highway where he hitchhiked to the nearest phone to call for help. His attempts to reach a phone took so long that the ambulance arrived too late for Darrell's grandfather. Years later, the local telephone service provider told the tribe that it would cost $20,000 per line to bring telephone service to the reservation. In response to their own communications needs, the tribe formed a company called Gila River Telecommunications, Inc. (GRTI). GRTI entered into a partnership to acquire a license for cellular service for their rural market. Gila River Telecommunications offers a free telephone and connection to any resident on the reservation, while offering modest monthly charges. Most importantly, GRTI provides emergency 911 service for the reservation. Nation-wide, wireless telephones have become an invaluable tool for emergency services. Last year, an average of 83,000 wireless calls per day were made to 911. The use of wireless phones has become a key factor in lowering emergency response times. Wireless phones are helping to save the lives of people like Darrell's grandfather. Improving communications access is critical in both rural and urban areas, and in our schools and libraries. In the Telecommunications Act of 1996, Congress mandated that the FCC shall "enhance access to advanced telecommunications and information services for all public and non-profit elementary and secondary school classrooms, health care providers and libraries." The FCC will provide $1.275 billion in 1998 to connect our nation's school children and public libraries to communications networks. During the past year, the 14 member staff of the Schools and Libraries Corporation (SLC) has processed over 30,000 applications for funding. They have also responded to 50,000 phone calls, 1,200 faxes, and 7,000 e-mails. By these figures alone, there is an obvious and immediate need for this Universal Service discount. Less than 20% of New York State's public school libraries have internet connections. Access to computers and information technologies can enhance the educational process. The skills gained by children will carry them into the next century as more and more jobs will demand knowledge of and aptitude with computers. Within two years, 60% of American jobs will require information technology skills, with these jobs paying 73% more in wages than non-high tech jobs. We cannot leave America's children behind. We must afford them access to the telecommunications revolution. Small businesses can play a key role in working with schools and libraries to provide the services to connect them to the Internet and communications systems. Businesses can also work with schools to help them identify the gaps between the needs of the job market and the skills taught in school. 20 years ago, India decided that, as a nation, it would make an investment in education that would make it the top educator of computer programmers in the world. Today, India is a world leader in highly skilled computer engineers and programmers. We have an opportunity today to make America's children number one in science, technology, business, language, arts, and humanities. Every field can be enhanced by the instant access to information the Internet provides. More importantly, every child can be empowered by the ability to communicate through the Internet. Let us make that commitment today for our children and for our future. Conclusion Again, I want to stress the important role that small businesses can play in the delivery of quality, consumer-oriented telecommunications services. It is up to you, the individual investors and small businesses to assess and bear the risks. It is up to you to identify your market niche and plan to compete. It is up to you to innovate. Will Rogers once said, "Even if you're on the right track, if you just sit still, you'll get run over." So be prepared for change. At this conference, you will learn about opportunities to participate in FCC auctions, become a licensee, or to work with licensees as contractors, tower builders, manufacturers, or resellers. You will also hear about opportunities that do not require an FCC license, like Real Audio which allows virtual "broadcasts" of sound to the global audience of the world-wide-web from a single website. Our luncheon speaker, Jeff Kline, co-founder of the Hispanic Radio Network, will discuss the public interest Spanish-language programming his company broadcasts via satellite to 17 countries in Latin America and their recent deal with CD Radio, a winner at the FCC's Digital Audio Radio Auction, to provide such content in the U.S. The message to you is to consider the opportunities broadly, assess the opportunities carefully, evaluate the competition, gather your resources, weigh the risks and be prepared. Thank you for joining us today for our Auctions '98 Conference. We hope that you have an informative experience and that the information you gain from today's conference will help you flourish in the communications age.