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Office of the Press Secretary

For Immediate Release October 13, 2000
                        TELEPHONE PRESS BRIEFING
                     COUNCIL OF ECONOMIC ADVISORS,

MR. KALIL: Thank you, Art. I want to start off by reading a statement that President Clinton issued today. He said, "Today, I am pleased to sign an executive memorandum that will help ensure that America maintains its leadership in two of the most important technologies driving the U.S. economy: wireless telecommunications and the Internet. I am directing federal agencies to work with the Federal Communications Commission and the private sector to identify the radio spectrum needed for the third generation of wireless technology.

"These so-called 3G systems will allow Americans to have mobile, high-speed access to the Internet and new telecommunications services anytime, anywhere. My administration is committed to strengthening U.S. leadership in the information communications industry. Over the last five years, the information technology sector has accounted for nearly one-third of U.S. economic growth and has generated jobs that pay 85 percent more than the private sector average.

"The action I am taking today will help U.S. high-tech entrepreneurs compete and win in the global marketplace. It will also allow consumers to enjoy a wide range of new wireless tools and technologies, such as hand-held devices that combine services like a phone, computer, a pager, a radio, customized newspaper, GPS locater and a credit card.

"I'm confident that federal agencies, working with the private sector, can develop a plan for identifying the spectrum that will meet the needs of the wireless industry and is fully consistent with national security and public safety concerns. As made clear in a report released today by my Council of Economic Advisors, time is of the essence. If the United States does not move quickly to allocate the spectrum, there is a danger the United States could lose market share in the industries of the 21st century.

"If we do this right, it will help ensure continued U.S. economic growth, the creation of new high-tech jobs and the creation of exciting new Internet and telecommunication services."

Our plan today for the briefing is that --

Q Is that statement available at


Q No, it's not on there yet.

MR. KALIL: It will be soon. Martin Baily, Chairman of the President's Council of Economic Advisors, will brief you on a CEA report that is being released today. Greg Rohde, Assistant Secretary for Communication and Information at the Department of Commerce, will walk you through the executive memorandum that the President is issuing today. Lin Wells, Deputy Assistant Secretary of Defense, will discuss the DOD role in this process. Bill Kennard, Chairman of the FCC, will discuss the FCC's perspective on this important issue.

So without further ado, Martin, take it away.

MR. BAILY: Thank you. Well, we have issued, as you know, this paper today, which is called, "The Economic Impacts of Third Generation Wireless Technology." And this is clearly a vital area. Telecommunications and the Internet are clearly among the most important sectors of the new economy, and the new economy has been driving the outstanding economic performance that we've had during this expansion.

This is -- shifting to 3G is a huge new sectoral opportunity. It combines two powerful innovations: wireless communications and the Internet. We find that today's wireless devices, which can transmit voice and brief text messages, are not able yet to handle the digital multimedia and other Internet high-bandwidth kind of content. As we open up to 3G devices, by contrast, we can get the kind of high-speed mobile connections that we need to really send the Internet wireless.

Now, I think it's clear from the usage of the Internet already that that opportunity to go wireless is going to be a big step forward, but I think it also is going to open up things that we don't yet fully anticipate, just as previous openings in technology have done.

There are a number of benefits that come from 3G. The first and foremost is the benefit to users or consumers, to include ordinary households and consumers, but also business people who are able to operate more efficiently as a result of access to this kind of bandwidth technology.

Now, we don't know at this point what the full benefits are going to be. But this report comments on a fairly detailed and careful study that was done recently that estimated the annual consumer benefit from today's wireless telephone service.

Now, this consumer benefit I want to stress is over and above -- the benefit over and above what consumers actually pay. When people buy something, you only buy it if it's worth more to you than you pay for it. And economists, by using econometric techniques, are able to estimate this surplus, what it's worth to you over and above what you pay for it.

And the study estimated that today's wireless telephone service -- between $53 and $111 billion of annual benefit to consumers. So it's really a huge thing. We suspect that the benefits from 3G will be of this order of magnitude. We don't know that. It could be more than that. But that's one way of sort of getting a handle on what this is going to be worth by looking at historically what the opening up of wireless telephone services is worth.

There are also benefits that come to the providers. They stand to gain profits from participating in this industry. Again, we don't know exactly what that's going to be, but one way of getting a handle on it is to take a look at some of the auctions that have taken place in Europe for companies to use the 3G spectrum. These have raised between $150 and $600 per capita in the places where the auction has taken place.

So if companies are bidding that kind of money, that suggests that they believe the flow of profits will be very substantial to them from the availability of this technology. And obviously they think they are going to earn more than they're essentially paying in the licenses from this 3G. Now, again, we would stress circumstances in the U.S. may be different from Europe, so the exact amount that might possibly be raised by auctions or exact worth of the spectrum for 3G purposes may be different, but this does provide a sort of order of magnitude of what might be available.

We think this, though, really is only the beginning of what we can get out of this technology, because once we have the 3G available, we think this will generate a whole set of new industries; just as we developed Silicon Valley around the computer chips and the computer, we think there will be a whole spectrum of whole -- that's not really the right word -- whole range of industries that will grow up as a result of the ability to use this technology.

The U.S. is already in a very strong position on both the Internet and wireless, but we do need to make sure that we maintain its leadership. Some other countries have already made auctions of their spectrum. A small country like Finland is actually the leader, as you know, in wireless technology. They are already developing new companies, new lines of business around their capacity on 3G, looking for ways to exploit this technology.

Again, we think that our economy is very strongly positioned here, but we want to make sure we don't lose that -- and that we can, in fact, by taking advantage of it.

So we believe the delays in introducing 3G products and services could be costly -- the delay the benefit to consumers and providers, but it also delays the U.S. companies that are going to seek to provide complimentary products and services.

Finally, we stress that the government policy, which will be worked out -- an allocating spectrum does have to weigh carefully all the benefits of costs involved. Obviously, you've got a lot of benefits here, but to the extent there are incumbent users on some of the spectrum, you need to make sure that their interests are taken into account, as well.

Thank you.

MODERATOR: Great. Thank you very much, Martin. Greg, if you could walk the reporters through what is actually in the President's executive memorandum.

MODERATOR: Tom, this is Art Brodsky. Before we get to Greg, I just wanted to make one change for the reporters. When I started asking who was on the line to send statements to, the list sort of grew longer than I had anticipated, and that's my fault. So what we're doing is posting everybody's statements on the NTIA website, which is -- and those will be statements from Chairman Baily, as you heard; it will be from Greg Rohde; from Chairman Kennard; and from Dr. Wells. So that will eliminate the need for us to send you all stuff individually. That's being done as we speak, and when it happens, I'll let you know.

Thank you, and here is Greg.

MR. ROHDE: Okay, thank you. Before we walk through the memorandum, I wanted to give a little bit of context. Some of this might be redundant for some of you. But the fact is that currently the United States enjoys widespread access to the Internet, in large part because we have a near ubiquitous telephone network. And in recent years, our cable network, which -- as well over 90 percent of American homes has provided high-speed Internet access to the Internet.

In addition, the near ubiquitous access to the Internet has also given us a competitive advantage in the whole electronic commerce revolution we've seen emerge in recent years. In addition to this, the United States enjoys a very vibrant, dynamically growing wireless industry that is growing at a rate of about 30 percent a year.

The development of third generation wireless is going to dramatically affect both of these significant trends, the Internet as well as the growth of wireless services. In fact, some predict that within the next 10 years that about two-thirds of the revenues that come from services and infrastructure in the wireless industry will come from data and nonvoice services, which is a dramatic comparison that currently most of the revenues and most of the services that are over wireless are voice services.

So, in other words, what that means is the electronic commerce is strictly becoming mobile commerce and the Internet is getting wings. And the fact is if the United States does not understand and come up to the plate with this trend, that we will quickly fall behind and fall into a competitive disadvantage. So that's why this is so important.

The administration has been working on the development of third generation wireless for quite some time. In fact, there has been a great deal of activity this entire year. A lot of activity began early in the year as a number of federal agencies -- Department of Defense, the FCC, the NTIA and others and State -- developed the U.S. position going into the World Radio Conference.

One of the top issues that was addressed this year in the World Radio Conference, which was held in Istanbul in May, was to look at the question of identifying certain spectrum bands that would be used for the development of third generation wireless or allocated for third generation wireless.

The United States succeeded in accomplishing our goals with respect to this issue at that conference. And that we advocated a policy that would provide maximum flexibility to administrations to identify what spectrum bands they want to develop for third-generation wireless. And we were very pleased at that result.

Now, what this does, though, is, that success now puts us in a position of now having to face the challenge as to, where are we going to look for additional spectrUM for third-generation wireless? The bands that were identified at the World Radio Conference include our existing first- and second-generation cellular and PCS services. And one of the objectives that we've had is to allow for these first- and second-generation services to evolve into third-generation services. We're already starting to see that happen. That's a very important development from the United States's perspective.

Now, we also have the challenge of looking ahead as to, if we're going to need additional spectrum, where will that come from? The challenge that we have for the United States that's relatively unique is that we don't have unencumbered spectrum -- that the spectrum bands that were identified at WRC have heavy incumbent use. And so that puts us in a very difficult spot, and a very challenging spot.

The purpose of this memorandum today, signed by President Clinton, is to set up a process through which the federal agencies that are affected -- with the private sector, will proceed to address these issues and identify the necessary spectrum to develop third-generation wireless.

So with that, I want to outline -- and again, this memorandum, copies of this will be made available to you. But I'm going to outline very briefly -- there are five principles of which the President is directing the federal agencies, to guide them as they proceed in this process.

The first principle is that the executive departments and agencies are to work -- are to work cooperatively with the Federal Communications Commission and the industry to identify the necessary spectrum that can be allocated for third-generation wireless use by July 2001.

Second principle is that incumbent users of spectrum that is identified for reallocation, or for sharing, must be treated equitably, and we must take national security and public safety into account.

Third principle is that the federal government must remain technologically neutral as we develop third generation wireless. We do not want to have a circumstance where the government is directing the standards for third generation wireless, or specific technology, that we want to allow for technologic neutrality.

The fourth principle is that the federal government is going to support policies to encourage competition and flexibility in these allocations. We want to maintain additional support for competition within the wireless industry, where we've seen great success so far.

And the fifth principle is that the federal government must support the industry efforts to identify and harmonize spectrum globally and regionally. Included in this memorandum are four specific directives. The first one is the President is directing the Secretary of Commerce to work cooperatively with the Federal Communications Commission and with all the other affected agencies within the federal government, to develop by October 20, 2000, a plan to select spectrums for third generation wireless systems.

And also this directive is to require an interim report be developed by November 15th of 2000 on the current spectrum uses within our -- within the bands that have been identified by (inaudible). In other words, by October 20th, the President is asking the Commerce Department to lead an effort to develop a game plan as to how we're going to go about, over the next several months or next couple years, to identify second and third generation wireless.

And in that game plan, we are to develop a report, an interim report, by November 15th of this year, as to what is in the incumbent bands that have been identified by the World Radio Conference. The second directive is to the Secretary of Commerce to lead an industry outreach effort, working of course -- that the other federal agencies and the Federal Communications Commission to reach out the industry.

It's very important in this process that we have not only collaboration and cooperation amongst government agencies, but also it is equally important that we have a collaborative and close working relationship with U.S. industry as we proceed to this process.

The third directive in this memorandum is to the Secretaries of Defense, Treasury, Transportation and heads of other executive departments and agencies that are affected by the spectrum to work cooperatively within this process and enforce -- there is a directive to the Department of State to participate in this process and also to coordinate the evolving views of the United States government with foreign governments and their national bodies to ensure that we have effective global roaming, which is one of the goals of third generation wireless systems.

So with that, I'll be happy to answer questions after other statements have been made. Thank you.

MODERATOR: Great. Thanks, Greg. Lin Wells will talk about the Defense Department's views on this issue.

MR. WELLS: DOD is pleased the presidential decision memorandum on third generation wireless services has been released and -- the President has provided. DOD looks forward to continuing in full cooperation with NTIA and FCC in the studies to consider all possible operations for 3G wireless.

DOD is working closely with them during the spectrum identification and decision-making process. Both DOD and Commerce agree national security must be protected. At the same time, DOD has an interest in a strong commercial industry because the Department uses a great deal of commercial technology.

MODERATOR: Great. Thank you. Bill? William Kennard, Chairman of the FCC, will talk about the FCC's perspective on this issue.

MR. KENNARD: Thank you, Tom. As many of you know, for most of this year, I have been warning of spectrum drought in this country if we do not take the steps now to make sure that we are freeing up more spectrum for services such as third-generation wireless. As the Internet migrates out of the personal computer and into wireless web-enabled devices, spectrum management is becoming increasingly important. Indeed, spectrum, or the absence of spectrum in some cases, is emerging as a major (inaudible) factor for the new economy. That's why it's so important that we elevate spectrum management to a national priority.

That's why we're very pleased at the FCC to see the President and the Vice President focused on a coordinated federal government approach to spectrum management. This is important not only for all the reasons outlined in the CEA report, and all the benefits to our economy, but it also is very important to the competition policies that we are working so hard at the FCC to promote.

As we see more wireless providers entering the marketplace and providing not only more innovative services, but also more innovative pricing structures, more and more consumers are finding that wireless phones are an acceptable substitute for the wire-line phones. And that, of course, is great for competition.

Let me outline now a couple of the upcoming events that you can watch for as we roll out this plan. As Greg mentioned, we are going to be working closely with NTIA and all the other relevant government agencies. And we'll be looking to release the interim results of our studies on November 15th of this year, studying the possibility of using spectrum that is currently encumbered and freeing that spectrum up for 3G.

At the WRC Conference in Istanbul, world governments identified three spectrum bands that could be used for 3G. We are going to be focusing a lot of attention on the spectrum identified in the 2500 megahertz band, which is currently encumbered by multi-point distribution services and instructional television fixed service. NTIA is going to be working with the Department of Defense and other agencies to study the use of the 1700 megahertz band. And we'll be working closely on releasing interim results of our studies on November 15th.

Now, the FCC goal is to release by the end of the year the notice of proposed rule-making, which will identify these and other possible bands for use for 3G. We will go out for public comment and aggressively solicit comment from all the stakeholders in the industry and in government. And our goal is to allocate spectrum for 3G services by July 30th of 2001. This will involve a rule making both to allocate the spectrum and also to establish the service and option rules, culminating in a competitive bidding or option for the spectrum by September 30th of 2002. So that is our plan, but obviously it's going to involve a lot of coordination among the federal government agencies, and that's why it's so important to have the President's involvement here.

I neglected to mention that while the November 15th studies are interim studies, we hope to have final studies by March 1 of 2001, and this will hopefully dovetail with our rule making process, so that the study process among the federal agencies will be moving in parallel to our rule making process. This is very important, because after lots of discussion among the people represented on this call, we decided that it's really not feasible for there to be the federal agency coordination to end, and then the FCC rule making process begin, because that would probably push us off beyond September 30th of 2002, when we want to have these options.

So we are obviously embarked on an aggressive program, and a very necessary program for the country.

MR. KALIL: Great, thank you very much. The other thing that I wanted to mention is that this is an action that has very strong support from industry, and I think if you don't have them, we could certainly make available to you the statements from the major industry associations, including CTIA, representing the Cellular industry, PCIA, representing the personal communications industry, and TIA, representing the telecommunications equipment manufacturers.

So with that, why don't we open it up for questions. You can either direct your question to someone specific, or just ask general questions and I'll field it to somebody.

Q I had a question for Chairman Kennard. I wondered if you were considering your speech earlier this week to the Museum of Broadcasters, or whatever they call that place up in New York. I wondered if you were hopeful of getting any of the spectrum from the broadcasters?

MR. KENNARD: Oh, absolutely. Doug, as you know, one of the centerpieces of that speech is finding a way to accelerate the return of the analog broadcast spectrum, so that it can be reauctioned sooner rather than later. That, of course, is the congressional plan that was outlined in the '96 Telecommunications Act and it's essential if we're going to expedite the digital TV transition.

But the plan that Congress laid out in the '96 act is that that analog spectrum would be returned and reauctioned and, as you know, when we auction spectrum, we auction it for flexible use, so it could be used for a variety of things.

Q I guess my question, though, is do you think you're going to be able to get that spectrum by the time you said you wanted to allocate it, which was -- when did you say -- allocate by July 30, 2001?

MR. KENNARD: Well, the analog spectrum should be reauctioned by 2002, according to the congressional directive. And we will be proceeding to try to expedite the return of that spectrum and, in this process, identify other spectrum that is encumbered that can be freed up for other uses as well, so that frequencies are really moving in tandem.

MR. ROHDE: This is Greg Rohde from NTIA. I want to make a clarifying point about that particular spectrum. It's important to understand that that spectrum that Chairman Kennard is speaking about is not within one of the bands identified by the World Radio Conference and therefore is not part of the process that we were speaking about today with respect to this memorandum that we'll be evaluating.

That doesn't suggest that that spectrum cannot be used for third generation wireless services. But I just wanted to make sure everybody understood that that spectrum is not within one of the bands that were identified by the World Radio Conference and is also not part of the two studies that Chairman Kennard spoke to that NTIA and the FCC are going to do on the incumbent use.

Q Greg, is the military still seen as a likely source of this 3G spectrum and, if so, how much will you need of it? And they claim that it's going to take at least 30 years and several hundred million dollars for them to move off that spectrum to free it up.

MR. ROHDE: Well, I'll tell you what we know at this point. At this stage, there are two basic blocks of spectra that we are looking at, that are equal options with respect to identifying for reallocation. One of those blocks is the 1755 to 1850 band, which the DOD is now the major incumbent in that band. That is one of the blocks we are looking at. And the interim report that I spoke to, that will be developed by November 15th, 2000, and the final report that Chairman Kennard mentioned, are going to be looking at that band, as well as the 2500 band to 2690, which is under the jurisdiction of the FCC. That is a commercial band which currently provides for MMDS and ITFS services.

So as Chairman Kennard said, NTIA is looking at the 1755 to 1850 band. The FCC is looking at the 2500 to 2690 band. Both of these are both going to be examined thoroughly. And the options of looking for a reallocation out of these bands are equal amongst these two bands.

Q Question for Tom Kalil. Is the White House committed to seeing the C and F block auctions go forward on December 12th? And will the White House veto attempts to delay the auctions as part of the budget process?

MR. KALIL: The administration is committed to seeing these auctions go forward in December. But I'm not in a position to make a statement on vetoing a particular bill over a particular rider. But we're strongly committed to seeing those auctions go forward.

Q Why is this coming out now?

MR. KALIL: The reason this is coming out now is that this follows on the heels of the World Conference, in which there was an international decision about which blocks of spectra were to be used for third-generation services.

Q Did the Chairman's speech recently -- you know, the fight over 700 megahertz -- prompt this in any way, or --

MR. KALIL: No. No. This was in the works already.


Q A question for DOD, please -- the services that they're currently operating in the 1755 to 1860 band identified, and what it will cost to remove those?

MR. WELLS: Services are satellite operations uplink, air combat maneuvering, mobile (inaudible) for tactical radio relays. We don't know yet the cost to relocate; that's one of the purposes of doing this whole study process.

MR. KALIL: But also options for sharing it, and band segmentation will be considered, as opposed to just sort of whole-cloth kind of relocating use of that space.

Q Currently, don't the deployed forces in Kosovo and Bosnia use MSE as one of their primary means of communication?

MR. WELLS: Certainly this is an important issue for us, and that's one of the reasons why we're concerned that national security concerns be adequately considered. Also, our issue is to find a comparable spectrum if we do have to relocate. So we'll be watching this very carefully, but look forward to working with all the players to make sure that the equities are protected.

Q But Mr. Wells, is that a "yes" to the fact that the deployed forces in Bosnia and Kosovo, the Army forces, use MSE extensively?

MR. WELLS: I believe that is correct. I will get back and verify it. But that's my understanding.

Q I have a question for Tom Kalil. I thought the military had previously committed itself to a November 15th deadline to submit a report. Why was it necessary for the President to submit an executive order, to order that?

MR. KALIL: No, I -- the administration, the President issued this executive memorandum as a way of encouraging inter-agency cooperation, laying out a set of principles and a set of action items, and also elevating this issue, because we think this is really important.

Q Does that suggest there wasn't cooperation?


Q Question for Chairman Kennard. There are emerging three and five gigahertz options for MNDS coming out in the industry. Do you think that competitive pressures alone can be accelerated to remove MMDS for two and a half, or will this require some form of eventual mandate?

MR. KENNARD: It's unclear. It's important for us to recognize that at this point, we are very, very open minded as to which of these bands will ultimately be used. We have a lot of work to do, to study the cost and benefits of using the spectrum. What is clear is that whatever spectrum is identified will require moving out incumbents in the band. And what we'll have to do with these studies is evaluate carefully what the cost and benefits of that will be.

Q Another question for Chairman Kennard. I was somehow under the impression that the federal government, and FCC in particular, was already looking for 3G spectrum. What exactly is the force of this memorandum?

MR. KENNARD: Well we are, as you know, we're an independent agency, charged with managing the spectrum. So we're always trying to identify the relevant spectrum for 3G. But this is an extraordinary circumstance here, because we are coordinating both with the government internationally, and we have to coordinate with the other relevant federal agencies. In fact, if you look at our communications act, we're charged by Congress with coordinating with NTIA on managing the spectrum. So we can't do this in a vacuum by ourselves. We have to work closely with our colleagues in the federal government.

Q Chairman Kennard, will this affect the Commission's plan for the March auction of the 700 megahertz spectrum?

MR. KENNARD: No, again, that's really moving on a separate track. The 700 megahertz spectrum, as Greg Rohde pointed out, was not identified in the Work 2000 and it's not the subject of these studies.

Q How much spectrum are you trying to free up here exactly? Is there a limit, a number?

MR. ROHDE: This is Greg Rohde, from NTIA. The World Radio Conference looked at the question of whether or not there should be up to 160 megahertz allocated for third generation services by the year 2010. That was the recommendation by the World Radio Conference.

Q 150 megahertz.

MR. ROHDE: Well, 160 Megahertz by the year 2010. Right now at this point, we don't know that. That's what these studies are about that NTIA and the FCC are going to do, is we first of all assess what is our spectrum need and that also points to the need to have a great deal of coordination and cooperation with the U.S. industry to make this assessment.

So the first step is we have to assess what our needs are and then secondly we have to look at, if we need additional spectrum, which we anticipate we may need additional spectrum, where are we going to get that? And we have to then go through the process of looking at how can we move certain services to other spectrum bands, what are the costs of moving those services, what's the time frame for moving services. And we have to do all that evaluation when we get to that point.

I wanted to make one other point that is very important to understand, particularly with respect to the military ban. And that is, it's a matter of law that if an incumbent is being moved, that there is provisions made to continue on those services. So one thing that is not on the table, we are not looking at what kind of services we could shut down that are currently being used; we are looking at can we move those services to another band. So that's really what the question is. It's not a matter of threatening an existing service; it's a matter of can you do that somewhere else in order to free up spectrum.

Q But, excuse me. But for Tom Kalil or anybody else there, it's my understanding that under the way the law is written, that insofar as relocation costs that a commercial provider, a mobile phone company or anybody else, that money would go directly into the U.S. Treasury and the Department of Defense would not be able to use any of it unless the law is changed; is that correct?

MR. ROHDE: This is Greg from NTIA. At this point, there are no provisions in the law that would require the revenues to go to an incumbent user to offset them. There is a requirement in the law that says that the incumbent must be reimbursed for the cost of their moving. And so you are correct in that if, indeed, this process resulted in a recommendation to say we were going to move somebody, and we wanted to use those revenues to cover those costs of moving, that would probably require a change in the statute.

Q The 700 megahertz I know is a completely separate issue, but it has highlighted a problem with incumbered spectrum. There's a whole problem now with getting the broadcasters off there, all the thing -- are you going to find a way to sort of avoid that quagmire with (inaudible), identify in the future? Any plans for how to get people off the spectrum without creating any problem?

MR. KALIL: The 700 megahertz spectrum is somewhat unique in that it was subject to a Congressional plan that was outlined in the '96 act. As I've stated recently, I think that we need to re-evaluate whether that plan will work to move the incumbents out of that spectrum, and facilitate DTV. But I really think we have to look at 700 megahertz as unique, because it was subject to a congressional plan that established the deadline and what requirements had to be met, which is not directly relevant to the spectrum we're dealing with.

Q Chairman Kennard, what do you envision for the idea -- providers right now, using it for a video and so forth, if that be moved?

MR. KENNARD: I'm sorry?

Q How do you envision dealing with the idea best users right now?

MR. KENNARD: Well, in our studies, we're going to evaluate how the spectrum is being used, and what alternatives are available, if we have to relocate those services out of the 2500 megahertz band. Increasingly, all of our spectrum is becoming more valuable, but we're seeing increasing demand for that spectrum for multi-channel video use, and also for mobile data uses. And so we're going to evaluate the technology that's available for wireless mobile use for that spectrum, and whether it can be transferred elsewhere, and what the cost would be.

MR. KALIL: Okay, this is Tom Kalil. We've got time for two more questions.

Q Yeah, can I ask you, can someone answer -- which of these dates that you have shown are newly set? I understand that September 2002 deadline for auction was already there. And even though you are speeding up the process, that final goal is still unchanged. Is there any way that auction date can be earlier is there actually no change in the schedule here?

MR. ROHDE: This is Greg from NTIA. The reason for that deadline in here, it's September 2002, that is because NTIA has already provided to the FCC the spectrum that is within one of the bands identified at the spectrum between 1710 and 1755 as well as 2110 and about 2160. And those bands have already been allocated to the FCC under a previous order from Congress. I believe it was the 1997 Budget Act.

And the reason we put that date down there is that it makes sense for us to understand what we're going to do with 1755 to 1850, whether or not that's going to be part of a reallocation before the FCC is required by statute to auction off those two other small blocks that are within that larger band that was identified in the World Radio Conference.

So that is where that date comes from, is that we should really -- we use that date to back up from to make our decisions.

Q Chairman Kennard, I have a question about the deadline. If the auction isn't for another two years and other countries have already auctioned off spectrum, how are we then to stay ahead of these other countries?

MR. KENNARD: Well, we are going to continue to work aggressively to get our spectrum allocated as quickly as possible. It's really not a question of staying ahead or not; it's really a question of making sure we are doing everything we can to get our spectrum allocated as quickly as we can.

You know, we face challenges that other countries don't, in that we already have a much more congested use of our bands. And so we have got to really work aggressively to meet our deadline. If we can get this done in advance of the September 30, 2002, deadline, all to the better.

Q Can I just step in? Isn't it possible that some of the existing wireless spectrum holders can migrate their existing spectrum into 3G? The additional spectrum would lower the cost and create more competition but I thought it was possible that some of the existing spectrum could be used for that?

MR. ROHDE: This is Greg from NTIA. I said -- I think I referred to that earlier. That was one of the reasons why we fought for the multiple bands at the World Radio Conference. And, indeed, that's what's already happening. It's not like U.S. industry is standing still. U.S. industry is actually moving ahead very quickly.

The question before us is how do we allocate -- we need to reallocate more spectrum to allow it to grow even faster. So it's not like in the interim nothing is happening. There are carriers already migrating with -- services.

Q Can somebody tell us roughly what percentage of the available or possibly usable spectrum is now controlled by the Defense Department?

MODERATOR: Can you repeat the question, please?

Q Yeah. I mean, roughly, how much of the spectrum that could conceivably be used for 3G is now claimed by the Defense Department?

MR. KALIL: I think we will have a better answer for you of that when the study is completed.

Q Well, I mean, surely, you have to have some sort of ballpark. You can characterize it any way you want, but --

MR. ROHDE: Well, currently -- this is Greg from NTIA -- within the three bands identified by the World Radio Conference, it looks like it's only -- there's 100 megahertz which is 1755 to 1850. There is another block between 2025 and about 2110, which is both government and non-government, that's within those bands, but really I think the answer to your question is probably about 100 megahertz, and that's the thing we're studying.

Q I know you mentioned that it's important to have our U.S. technology companies get in first, and don't fall behind. But specifically, what is the big deal if we fall behind on 3G? What problems will we face?

MR. KALIL: Martin, do you want to talk about sort of the importance of first mover advantages, something that was highlighted in the CGS study?

MR. BAILY: Well, I think experience with information technology has been that there is some geographic specificity if you get -- if you have the ability to develop industries around the area, so that it's really important that we locate some of the new industries and new technologies here in the United States. And we've seen that happen obviously in the high tech sectors in the United States. We're seeing it now happening in Finland, where they have moved toward the 3G and they're beginning to set up locations there.

Now, some of the companies that are operating there are American companies like HP, and so again it's not that American companies will necessarily be shut out, but it does make a difference to have that technology available in the United States as soon as possible and to the greatest extent possible.

MR. KALIL: I mean, just to give you an example, I think it's fair to say that companies like Cisco have benefited from the fact that the Internet happened in the United States before it happened in the rest of the world. So there's a real advantage to U.S. companies for having the United States continue to be the center of innovation and new technologies.

And I think that, although we have some issues in terms of more a suggested spectrum in the United States, an advantage that we have is lots of small entrepreneurial companies that are developing software and applications, a very strong venture capital sector that can invest in these new high tech start ups. So I think the U.S., although we've got some challenges to deal with, is very well positioned to maintain its leadership in this area.

Q Who was speaking, I'm sorry?

MR. KALIL: Tom Kalil.

Q I'll follow up on the education and the ITFX spectrum. You know, there isn't an elected leader in this country that's not all for education, particularly the ones running for office. But what I take away from this press conference is that the ITFS spectrum is really up for grabs. So instead of helping to educate children, we're going to auction it off to the highest bidder, so that people can buy flowers while walking down the street with their cell phones. If you would address yourself to this question?

MR. KALIL: Well, again, let me be really clear about this process. We're not proposing to take away spectrum from any incumbent user and leave them with no spectrum at all. We're looking at ways that we can relocate them to other uses. And this is what we've done historically in this country. That's one of the reasons why we have a PCS industry in this country, because we found a way to relocate the incumbent microwave users in those bands and find ways that they were compensated and able to find spectrum uses elsewhere.

So, you know, I don't want there to be confusion here that we're going to pull the plug on any incumbent user, be it a defense use or a commercial use.

Q -- guarantee today that they'll have exactly the same amount of spectrum when this process is done, the ITFS users, as when they started?

MR. ROHDE: This is Greg from NTIA. I'd just refer you back to the presidential memorandum, where it's very clear that one of the principles that's going to drive this process is that incumbents are going to be treated equitably, and that we are going to address the incumbents. It's the only way that we can move ahead and be successful in this process.

So if this process were to denigrate into a spectrum grab, and not take care of the incumbent needs, we won't succeed in moving ahead. So it's very clear in the President's memorandum that this is a key principle on which we're going to move ahead, whether that incumbent is commercial or a non-profit educational incumbent, or whether it's a government incumbent.

MODERATOR: Thank you all very much. Thank you very much for participating in the call.