Opening Remarks by Michele C. Farquhar Acting Chief of the Wireless Telecommunications Bureau at FCC March 15, 1996 "Auctions 96" Conference Sponsored by Office of Communications Business Opportunities Good morning. I am very pleased that the Wireless Telecommunications Bureau has had the opportunity to work with the Office of Communications Business Opportunities (OCBO) in providing this forum. One of the goals of this Bureau is to ensure that there will continue to be ample opportunities for small businesses and new entrants in providing wireless services, particularly as we move toward greater use of auctions as a spectrum assignment tool. Today I will briefly describe the FCC's auctions process and the role of small businesses, as well as ways we can work together to ensure enhanced future opportunities in this industry. To date, we have completed auctions for over 700 licenses covering broadband and narrowband Personal Communications Services (PCS), Direct Broadcast Satellite, and Interactive Video and Data Services. These auctions have raised $9.8 billion for the U.S. Treasury. In addition, we have three ongoing simultaneous multiple round auctions for 2,038 licenses. These auctions have raised an additional $9 billion for the U.S. Treasury, bringing the total to over $18 billion. The true appeal of auctions as a licensing tool is that they allow the marketplace to work. They are a fast, fair and efficient way to provide the American consumer with the maximum benefits of communications. First, they allocate licenses to the company that values them most. This means that the licensee will be someone who intends to serve consumers instead of someone who got lucky in the license lotteries. Second, auctions are fast. The entire licensing process from the initial public notice announcing an auction to license grant, on average, takes less than a year. This is a substantial improvement over lotteries and comparative hearings. Finally, auctions provide the taxpayer a fair return for the use of a scarce and valuable public resource. We recognize that small businesses play an important role in creating job opportunities and innovation in the marketplace. The U.S. Small Business Administration reports that in 1990, small businesses accounted for 90% of all new jobs created. Small businesses also tend to spend more per capita on research and development and develop new products more efficiently than large firms. The 1993 Omnibus Budget Reconciliation Act (1993 Act) directed the FCC to take measures to ensure that small businesses, including businesses owned by minorities and women, and rural telephone companies have opportunities to participate in the provision of spectrum-based services. For broadband PCS, we have established spectrum set-asides where eligibility for licenses is restricted based on financial size. Also, for several services, we have made bidding credits and installment payment programs available to small businesses to assist them in overcoming what they have indicated to be the one barrier to success in the wireless telecommunications industry -- access to capital. We are particularly pleased with the success of our installment payment program, which has proven to be key in helping small businesses attract capital. Current and future bidders should note, however, that this program includes strict and clear repayment terms. The FCC fully intends to enforce these terms and to vigorously pursue any winning bidders who default on their licenses by not complying with such terms. Thus, bidders eligible for the FCC's installment payment program should use it not to place bids based on speculative values, but to place bids based on fundamental financial analysis. A review of the FCC auctions (both past and current) indicates that we have had success thus far in achieving Congress' mandate. For example, in the narrowband PCS regional auction, four of the nine winning bidders claimed status as small businesses owned by minorities and women. In the three ongoing auctions, of the 536 eligible bidders, 343 were identified as small businesses, 64 as minority-owned firms, 56 as women-owned firms, and 55 rural telcos. More importantly, more than half of the small, minority- and women- owned firms are still actively bidding in one of the three auctions. Given that the Multipoint Distribution Service and Specialized Mobile Radio auctions are in the final stages, we are confident that there will be a diversity of entities offering new and enhanced wireless telecommunications services in the near future. Wireless competition can and will come in all shapes and sizes. Nonetheless, we are not resting on our past successes in moving forward with future auctions. Working with OCBO, we are interested in making even further strides in providing small businesses with meaningful opportunities to participate in spectrum auctions. Today's seminar is one important step in this direction. This seminar will provide highlights of those wireless radio services which may be auctioned later this year or in early 1997. We anticipate that this information will assist potential applicants and bidders, particularly small businesses, in developing future business opportunities. As a result, we believe that these applicants will be better able to approach spectrum auctions through informed decision- making and avoid the substantial financial risk and related pitfalls associated with speculative bidding. Today's seminar is just one step in ensuring opportunities for small businesses in spectrum auctions. You must take the lead on the next step: I invite all of you to become active in the rulemaking proceedings associated with these wireless services. A critical aspect of any rulemaking is public comment. Through your participation, the FCC can receive proactive feedback on its initial proposals from the entities who are the primary beneficiaries. We are confident that this exchange of ideas and information will result in even more success in achieving the objectives of the 1993 Act. In that vein, I'd like to describe a conversation I had with FCC Chairman Reed Hundt a few weeks ago. He was very concerned that the Bureau accelerate its efforts to enhance small business and new entrant opportunities in wireless communications, both within and beyond the context of auctions. For example, enabling companies that win licenses at auction to subdivide or disaggregate their spectrum holdings is one possibility, and providing an accessible database regarding such opportunities is another. We would be very interested in other ideas you may have, and I have assigned D'wana Speight on my staff to work closely with OCBO in developing these ideas. Additionally, the FCC, as part of its implementation of the Telecommunications Act of 1996, will initiate a rulemaking in April regarding market entry barriers. We envision that comments from small businesses and entrepreneurs will play a pivotal role here. I encourage all of you not only to follow this proceeding, but also to become active participants. Your presence here today indicates that many of you are interested in taking the next step. To reach that next step quickly, I want to identify at least one way in which you can gain access to and information from the Bureau: The Wireless Bureau site on the FCC World-Wide Web Home Page. Our Home Page contains detailed descriptions of all of the wireless services that we regulate, daily updates on the auction results, Bureau decisions, public notices, and other information. We invite you to take advantage of this new feature. Another readily-available source of information is the National Telecommunications and Information Administration's online Resource Center. NTIA's Resource Center provides information on telecommunications financing, business counselling and training, emerging technologies, and new business opportunities. NTIA tracks the latest information on upcoming conferences, meetings and FCC filings. I applaud NTIA, and particularly Assistant Secretary Larry Irving, for their efforts in facilitating small businesses' access to information, and invite you to tap into this additional resource as well. I know firsthand that Larry has made a tremendous personal and professional commitment to facilitating increased opportunities in this area, and we will continue to rely on NTIA as a valuable partner in this endeavor. I also want to personally thank Cathy Sandoval for inviting me to speak and for sponsoring this forum today -- I can assure you that she has been a dedicated, unflagging, and persuasive advocate for your interests within the Commission. We look forward to having each of you participate in our upcoming auctions and successfully implementing new services for American consumers. I hope that when people talk about one-stop shopping in the future, they mean wireless shopping malls, with a whole range of services offered by growing, independently owned companies, as well as a few big anchor tenants. Again, thank you for joining us today.