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Chairman Tom Wheeler Testimony on The FCC's Fiscal 2015 Budget Request

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Released: March 25, 2014

Statement of

Chairman Tom Wheeler

Federal Communications Commission

Hearing on the FCC’s Fiscal 2015 Budget Request

Before the

Subcommittee on Financial Services and General Government

Committee on Appropriations
U.S. House of Representatives

March 25, 2014

Chairman Crenshaw, Ranking Member Serrano, and members of the Subcommittee, I am pleased
to appear before you today, alongside my colleague Commissioner Pai, to present the Federal
Communications Commission’s Fiscal Year (FY) 2015 Budget Request.
Although I have testified before a number of other congressional committees during my career,
this is my first appearance before an Appropriations Subcommittee. I see this as an important opportunity
to update you on the FCC’s activities while providing you with information essential to developing the
Commission’s funding levels.
When I assumed the Chairmanship of the FCC last November, I was impressed by the
Commission’s moderate budget levels and the extraordinary work that this agency has accomplished
during the past few decades. The Commission has raised more than $53 billion for the Treasury in
auctions revenues since 1994 – $1.56 billion of that just last month. We are on course to raise billions
more in the next few years to fund, among other things, the deployment of an interoperable broadband
network for our nation’s first responders, as well as to reduce the deficit. The Commission supports an
industry that is essential to our nation’s economy and stimulates ever-higher levels of financial growth.
We have repurposed and re-engineered significant amounts of spectrum to fuel these industries –
including spectrum that would have been considered almost useless barely a decade ago. During the past
three years, the Commission has reformed the Universal Service Fund (USF) – a massive undertaking
designed to take this 20th Century program into the next decades of the 21st Century – and now we are
building on that reform with a sharpened enforcement focus.
The Commission’s activities are entirely funded by those it regulates. In other words, there is a
zero relationship between Commission expenditures and the federal deficit. We have no direct
appropriation, and we work hard to raise funds to put money back into the Treasury. In fact, the
industries that we regulate contributed $17 million to sequestration since that money was derived from
their licensing fees. Auctions revenues cover auctions costs, and the USF funds cover USF program
costs.
The FCC’s FY 2015 Budget Request is $375,380,313, including $11,090,000 specifically
allocated to the Office of Inspector General. Our auctions cap request is $106,200,000. Adopting this
request will allow us to follow through on important priorities identified by your committee and our
authorizers: the continued reform of USF programs to combat waste, fraud, and abuse and enhanced
enforcement to put teeth into those reforms; as well as internal agency reform designed to make our
processes responsive to consumers and the industry in a cost-effective fashion. Importantly, the auctions

funds will support spectrum auctions identified in the 2012 Spectrum Act, which will make additional
spectrum worth tens of billions of dollars available for commercial licensed services as well as providing
nationwide spectrum for unlicensed use; and will support FirstNet.
Although it is important to keep costs down in the current budget environment, let me give you a
snapshot of the Commission’s recent budget restraints. The FCC’s spending levels decreased after FY
2009 from $341 million to $335 million, and hovered just at that mark for two years, finally hitting $339
million during the next three years – with $17 million of that number going toward sequestration in FY
2013. During FY 2013, the FCC cut its programming to the bone and worked hard to find cost savings,
often delaying lifecycle replacements and improvements for facilities and equipment. In FY 2011, the
FCC had 1,776 employees. Today, we are down to 1,725, which is a 30-year low in FTEs. The number
of FCC contracting personnel also has steadily decreased from a high of 959 in FY 2009 to a current level
of 470.
These cost reductions had real consequences. We have been unable to replace our Office of
Engineering’s Equipment Authorization System, and at this year’s Consumer Electronics Show, I heard
complaints about how sequestration’s impact had slowed the approval of new products before last year’s
holiday shopping season. Cuts in employees left us chronically understaffed in enforcement, for example,
so that our work to police pirate radio activities suffered – a big concern among some broadcasters – as
we focused all available resources on public safety and homeland security activities. Likewise, we never
replaced or upgraded our enforcement equipment. In fact, we have more than 200 relic IT systems that are
costing the agency more to service than they would to replace over the long term.
An effective and well-resourced FCC is critical, because we oversee the networks that power our
information economy. The Commission’s policies to unleash spectrum, promote competition, and provide
regulatory certainty can help spur innovation and investment in a vital sector that drives economic growth
and job creation. And the information and communications technology sector continues to be one of the
leading lights of our economy and a key to our global competitiveness. For example:
·
American firms account for 84 percent of global profits in the computer hardware and software
industries.
·
In 2010, the ICT sector accounted for 24% of real GDP growth.
·
Each year, the ICT sector generates more than $300 billion in free goods and services that are not
captured by GDP statistics.
·
The mobile apps economy, which didn’t exist at the start of 2008, has created more than 750,000
U.S. jobs.
·
Since 2009, more than $250 billion has been invested by private companies to expand, extend and
upgrade broadband networks, which exceeds investment by the major oil and gas or auto
companies.
·
Annual investment in U.S. wireless networks grew more than 40% between 2009 and 2012.
·
Venture capital financing of “Internet-specific” businesses has doubled in the past four years,
from $3.5 billion in 2009 to $7.1 billion in 2013.
During the next year, the FCC will be hard at work on activities that will deliver significant
benefits to consumers, businesses and our economy. We will be developing and licensing spectrum
resources to spur innovation in new communications devices; upgrading, enhancing and securing our
internal systems to better serve consumers and the industries that rely on us; and modernizing and
enforcing our USF programs. That is really what the Commission’s FY 2015 budget is designed to
support – another boom year of communications services for the American consumer and another year of
growth for the industries that we support.
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During that same year, the FCC, like the technology and telecommunications industries, needs to
adapt to keep pace with the exploding marketplace. The FCC needs the basic tools to sustain and
encourage industry growth; to protect licensees; and ensure the reliability and safety of the systems that
we use. We need to do so in a way that fosters solid management practices that support, sustain and
enhance the industries that we regulate.
One of the primary reasons that I initiated a process reform review upon assuming the FCC
Chairmanship was because of my commitment to create an agency that is highly efficient, as well as
responsive to the needs of all Americans. Instituting reform at this level will require the expenditure of
resources that support essential programmatic changes. To support these efforts, the Commission is
requesting a total of 1,790 FTEs for FY 2015, which includes an additional 10 FTEs for Information
Technology (IT) programming and 45 FTEs for USF modernization and oversight. These numbers are
projections over the current low number of FTEs, and they represent an increase of only 14 FTEs over FY
2011 levels.
The FCC carefully considered the need to hire additional employees prior to submitting its FY
2015 Budget Request. We have far fewer personnel in IT than comparable agencies, and, as I mentioned
earlier, we have more than 200 incompatible, aging computer systems that, because they cannot talk to
one another, act to increase the cost of doing business. We must overhaul, upgrade, secure and replace IT
systems that are antiquated relics – costly to maintain and harmful to agency productivity. The Process
Reform report that I commissioned draws a direct line between inefficient and unreliable IT systems and
sluggish administrative and regulatory activities. Certainly, the FCC, of all agencies, must be able to
communicate effectively inside and outside the Commission. The failure to invest in IT now will keep us
from achieving many of the reform goals that Congress has set – from transparency to timeliness.
Our other major spending target is USF modernization and oversight. The need here is urgent
and resource-intensive. I intend to place a heavy – but not heavy-handed – emphasis on modernization
and enforcement to ensure that USF adheres to Congress’ vision and provides essential access to
telecommunications services to all Americans – whether they live in a remote area of Alaska, in one of
our American territories, or on an Indian reservation in North Dakota. On that note, I would emphasize
that closing the infrastructure gaps in Indian country is an agency-wide priority, and I am committed to
greater consultation with Tribal leaders to promote broadband deployment and adoption in their
communities.
We envision hiring a broad range of USF specialists with the regulatory, enforcement, economic,
legal, accounting and auditing skills necessary to provide oversight of the USF programs in multiple
offices and bureaus. Although our Budget Estimates for FY 2015 indicate that most hires for USF would
be targeted in the Wireline Competition Bureau (WCB), our new Managing Director currently is
reviewing and revising the individual bureau staffing levels in accordance with the Commission’s mission
objectives. While the final recommendation has not yet been made, the USF employees will likely be
distributed among WCB, the Enforcement Bureau (EB), Office of Inspector General (OIG), and Office of
Managing Director (OMD). Every time I read or hear a news story about someone who tries to game the
USF system, I recommit myself to the goal of dedicating qualified staff to reducing fraud.
Our requested auctions spending bump will support current auctions activities as well as the
complex process of developing the Incentive Auction Program. Since 1994, the auctions expenses have
been approximately two percent of our total auctions revenues. The Commission operated the auctions
program for 10 years under a cap without inflationary adjustments, only receiving an increase in FY 2013
to fund the start-up for the Incentive Auctions program.
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The Commission welcomed the statutory authority to initiate and operate Incentive Auctions
because of its benefits to consumers and stakeholders, as well as the Treasury. We are grateful that you
recognized the need to ensure that this program is properly funded and that you provided us with the
necessary resources to move ahead with our work, even as other programs were facing sequestration. The
importance of this auction to the public safety community and the boost it will provide for nationwide
interoperable communications will benefit all Americans. We also see this auction as a significant
financial opportunity for many broadcasters – it will enhance the ability of broadcasters retaining their
spectrum to continue providing the public with diverse, local, free over-the-air television service.
At the same time, the reclaimed spectrum will promote economic growth and enhance America's
global competitiveness. More spectrum means more speed, capacity and ubiquity of mobile broadband
services such as 4G LTE and Wi-Fi networks. These benefits will be magnified by another auction
scheduled for the next year, AWS-3, which will provide access to reclaimed federal spectrum.
I appreciate this subcommittee’s attention to the Commission’s funding needs during the next
fiscal year, and I look forward to working with you to fulfill our statutory mission efficiently and
effectively. Thank you.
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