March 10, 1997

Re: Use of the 220-222 MHz Band, PR Docket No. 89-552

Today we close a decade-long initiative to license services using spectrum-efficient technologies in the 220-222 MHz band. Our decision removes restrictions on the types of technology that can be used, increases the flexibility of licensees to provide any fixed or mobile services, allows for the expeditious licensing of remaining spectrum by competitive bidding, and furthers our statutory mandate to encourage development of new and spectrally efficient technologies.

I disagree with those who advocate allowing only the current 5 kHz channel plan. The better approach is the one we take here to introduce flexibility for the channels and allow the newer technologies to be implemented by placing the channel bandwidth decision with the bidders and the marketplace. The channels will be auctioned in either adjacent or non-adjacent groups based upon the former channeling plan. Bidders may purchase, trade, aggregate, or partition in any fashion they wish. We also propose to permit spectrum disaggregation. Using these tools, licensees will be able to obtain the specific channel bandwidth(s) they desire.

In the Notice, we tentatively concluded that allowing channel aggregation should be accompanied by a spectral efficiency requirement at least equivalent to that obtained through 5 kHz channelization. The requirement here is based upon the one adopted unanimously last year in our Refarming proceeding, Docket 92-235. It is technology-neutral, attainable, flexible, and will sunset in five years.

Continuing to use the 220 MHz band as a commercial testbed for spectrum-efficient technologies furthers the purposes set out in our competitive bidding authority, Section 309(j) of the Communications Act. This Act requires, among other things, that we "protect the public interest in the use of the spectrum" and promote its "efficient and intensive use."

This Congressional directive within our competitive bidding authority is, of course, consistent with the goals and requirements expressed elsewhere in the Act. For example, Section 7 requires that we encourage (not merely permit) the provision of new technologies to the public. Similarly, Section 303(g) requires that we "study new uses for radio" and "generally encourage the larger and more effective use of radio in the public interest."

Congress would not have charged us separately to ensure efficient spectrum use if competitive bidding itself was sufficient to attain this objective. Competitive bidding provides an incentive for economically efficient service, but does not necessarily result in use of the most spectral efficient technology.

Because we have not imposed an efficiency requirement in other auctionable bands, the need is more compelling to continue the experiment in this small two-megahertz wide band. Here, licensees can experiment with spectrally-efficient, state-of-the-art technologies without interfering with older, less efficient ones.

Dale Hatfield, in his 1995 paper "The Economic Impact of Refarming" -- submitted in our Refarming proceeding -- demonstrates the value of spectrum efficiency. Hatfield explains that increasing efficiency to 5 kHz (from 7.5 and 6.25 kHz) in just the 150 and 450 MHz private bands would increase the number of available paired channels by 32 percent, resulting in the creation of over 8,000 service jobs and thousands more manufacturing jobs. Hatfield estimates that in an auction, the additional spectrum capacity would have a value in the billions of dollars. Even if wildly optimistic, a fraction of this predicted benefit would be of continuing value to the American public.

Providers employing less spectrally-efficient technologies have the universe of other bands from which to choose. Some of these bands will also be available to competitive bidding within the same timeframe as the 220 MHz band. I have not supported an efficiency rule for other commercial bands, believing that marketplace forces should be relied upon for establishing the balance between efficient spectrum use and cost of service. However, allowing this testbed to continue for five years in a technologically-neutral fashion furthers the goals established by Congress, harms no potential service provider, and has great potential to benefit the public.