Brought to you as a Public Service by your local Cable Provider or satellite provider. Host and from time to time on the the communicators we like to talk to the Telecom Associations based in washington to talk about their Public Policy concerns. Jot carpenter is here and he is the Vice President for the wireless ctia association. What is ctia . Guest it is the trade association that represents the Wireless Industry. Was once the Cellular Association and then it was the internet assocuation and then we decided instead of keeping the change to name we become the wireless association. Host who you you represent . Guest independent companies, network companies, and vendors like apple and samsung. Host given that wide swath of the telecommunication word world you represent, sometimes their interest isnt the same . Guest it isnt. We spend a lot of time working with members to identify issues of common interest. It is around spectrum policy, tax policy, reglartory things. Host joining us is the Paul Barbagallo, managing editort a bloomberg. Good morning. Spectrum policy as you noted is one issue. The fcc is preparing for the aws3 auction and the incentive auction in 2015. Given the recent data consumption curbs and americas appetite for mobile broadband, will these two auctions satisfy the demand by carriers for more spectrum . Guest it will help. If you go back to the National Broadcast plan in 2010, they called for 300 megahertz of spectrum and 500 megahertz of spectrum over ten years. These two auctions should represent a significant step toward the goals, a nice downpayment, but dont get us to where we need to be. The aws3 brings 65 megahertz of spectrum. And the incentive will bring additional, but we dont know how much. Something in the 86 megahertz range and you are halfway to the 300 megahertz goal for licensed mobile step. It is a significant step but not the end of the work. And in 2010, it was estimated the mobile carriers would need 800 megahertz to keep up. Is that number still accurate . As i read studies from cisco and others the demand curve is increasing. Is 800 still a number that is accurate . Guest we think it is still a good goal. Working again from the broadband plan, if you take that 150ish number from aws3 and the intentive auction and the h block and you figure out what is in the 20182020 tranche. And the work to identify that needs to start now. The cisco projections are staggering. They projected between now and 2018 the mobile Broadband Demand would increase eight fold. If you thought traffic was going to increase eight fold in washington, d. C. In five years you would need road. We face the same problem. We need more spectrum. New technology helps. But we probably also ought to be working at figure out what the next tranche is after the incentive auction. Host what do you think could be the next step . Guest it is going to be a challenge in the sense there is no prairie or virgin swath. We will have to repurpose federal spectrum. There are a huge number of federal users on old systems and moving them to more Efficient Technology may render spectrum divdened that could be sold at auction and used for personal use. Generates spectrum for companies and the government to make revenue. In the commercial sector, looking at smoothing the Second Market approval so you can take spectrum from someone who is not using it and more it quickly into the hand of those who value it. Host such as whom . Guest our members can identify another license holder that has spectrum and it would fit with their portfolio. We dont mind there is an approval process, but it ought to be speedy and predictable and as short as possible. Deputy federal cheap Technology Officer tom power said the pcancer report from july of 2012 report led to a rethinking of the governments approach to spectrum. Do you agree and what are your fews on how the fcc and the nti have responded to the report . One of the big recommendations was to open up the airwaves to more sharing. Guest i think there is going to be continued conversation around sharing. I dont want to see the conversation about sharing clear out clearing. The answer is to have both. Clear spectrum whenever that is possible. We think clearing is the optimal outcome and the Gold Standard for cti members is clear and harmonized spectrum. Where that is achieved we think that should be the goal. We have an auction method that has worked well and we should continue to go through that path. But to the extent it isnt possible to clear, we can look at sharing opportunities. Some are easier to accomplish than others. Geographic sharing is something we do today and we can work with federal users that may have a broadband they occupy but only use in a limited part of the United States geography. Temporary sharing with the military uses a broadband and trains in it once or twice a year and can we use it when they are not. I think what is more challenges and where mr. Powers spent more time than we wish they had was cognitive sharing. The idea of frequency hopping on and there is no technology that does this. Our guys need to provide worldclass service to consumers and the idea they are not in control of spectrum is troubling. We dont think it is the way to build a business. Lets focus until we get there on what works like clearing and the sharing examples. Do you have hope the 3. 5 gigahertz band . Guest we do. Our focus is on clearing below 3. 3. 5 offers an interesting idea for small cell technology. There is going to be tiered access and we are interested to see the commissions that drive it home. There has been good participation from the members and the carrier vendor community. We think there is promise there. That maybe a good sharing example, if you will. Host at the National Broadcasting meeting in april, gordon smith said ours is the only industry the spectrum auction can actually harm and it is an open question whether the fcc has balanced the aims of freeing up more spectrum and protecting the broadcasters. Guest the commission hasnt completed its rulemaking so we are all waiting to see what kind of rules the commission are going to put forward. I dont think there is a deliberate part to injure the broadcast system. It is voluntary. No broadcaster has to par pis participate and for those who do there is going to be many options. You can channel share, for example. We finished a Pilot Project in los angeles where we worked with two broadcasters, one commercial and one public, to show the sharing concept and we were pleased with the results of that trial. We think it will demonstrate to a large swath of the Broadcasting Community the viability of the channel sharing action so they can realize benefit from the sharing. I think there is real potential. Between the facts the rules are not written and it isnt clear when broadcasters participate, i understand senator smiths concerns, but i think he ought to withhold judgment. Ctia undertook a study in which two broadcast stations shared the same 6 megahertz channel and the results were quite positive for broadcasters. And quite cleary, it showed that broadcasters can share and certainly hd. What do you see as the potential for broadcasters sharing . Is it financial in nature or or issues . Guest paul, that is the good question. It is hard to generalize in that every market is different. Each broadcasters portfolio looks different. But in general, you will have some broadcasters saying the intei ince incentive auction isnt for us. This is where we have been and where we will be. And our expectation has been there will be a subset that choses not to participate under any circumstances. But we think stations that are chronically challenged on the funding side, you go to channel share and noticed the fusion of capital in the business and no impact on the signal and consumers is attractive. So that channel sharing pilot we held in los angeles demonstrated you can support multiple hd signals, up to three, on one six megahertz swath. You can do 2 and 4 standard definition and one hd and up to seven definition signals. Depending on what kind of broadcasters are participating and what they are offering to end users they get a lot of option. The broadcast incentive auction is a onetime thing. They maybe able to put their license in. If it doesnt reach the threshold they want they dont have to tell but they have options. Host would the potential of new Net Neutrality rules coming online, or standards i should say, should those apply to the Wireless Industry as well . Guest peter, i dont think so. The old rules recognized that wireless was different. The rules that were struck down by the court also said wireless is subject to the same trance transparancy nature, the unuke wireless architec cture and the have a different treatment of wireless. We were not subject to the nondiscrimination policies on the wireline. Now after the dc decision to go back and look at these, we hope they will continue to recognize that wireless is different. It is different in terms of bandwith and the architecture of the network but it is robustly competitive and carriers dont have a marketbased incentive to do anything other than deliver an open positive experience to their users because if you dont like what you get from carrier a it isnt hard to move down the list. And that much more than a rule is what is going to drive consumers to have a positive experience. Carriers have no incentive to disthrottle traffic in a way that harms consumers and internet providers. The fcc has been busy setting up spectrum auctions for the future but they have been opening up the airways for unlicensed wifi use. Many people thought wifi would be a great competitive threat but carriers are using wifi to offload their traffic. Given this is a clear position of the fcc that unlicensed and licensed to be a twoprong approach. How to carriers view wifi . Guest i think it is a critical component. Ten years ago there was a different view. Ten years ago there was the view that there was a licensed crowd, unlicensed crowd and never should the two mix. Carriers are seeing wifi as a part of their strategy to manage their license severs. The faster you can offload traffic, including using wifi, the better off you are going to do. We applaud what the fcc did. The five gigahertz broadband isnt hospitalable but they are undealed for unlicensed. So it is helpful to have it. You want two people fighting and sit back and watch. People want to stir the pot about license and unlicensed but it is both. We want to provide services below 3 gigahertz. Above 3, you might be looking at licenses. We want access to both. Going back to the broadband planned and 300 for service and licensed. We are happy to have both. With the new wifi standards online and the airwaves holding tremendous options, is there a fear that wifi can pose a threat to licensed companies . Comcast is launching a wifi Wireless Service that would compete against the at t and verizon. Is this viable . Guest we will see. If someone has a new idea they want to bring to market, come in. The more the merrier. Lets see how it goes. Host jot carpenter is our guest here and he is Vice President of government affairs. I got involved in telecom after i got to washington. You go to hill and you get ten things to do and if you are lucky some are fascinating. I was asked to work on telecom and i realized this is a lot of neat work. It was cuttingedge. It helped the economy. It was a great opportunity and i am grateful it for being hired. Host 3. 8 million jobs are related to the Wireless Industry. 146 billion added to the gdp via the Wireless Industry. When the comes to the nsa and phone records, who should be holding those phone records . Guest that is a tough question. If the government happens to need something while a company is holding it for business purposes and they bring the right kind of court order our companies have a history of complying. We dont view it as our role to get between the government and the Civil Liberties unit. If you bring us the right order prom the court we will reply. But we dont look like to be in the Data Retention business for any longer than needed. It isnt a space the industry wants to be casted. Another important issue to ctia is wireless taxes. What are your views on the hill with respect to wireless taxes . Guest there are a multitude of projects going on we hope to get done and rather that is individual bills or one big bill. We want to see a permanent extension of the internet taxation. That prevents end user taxes on the internet but also discommerce as well. It needs to be extended. It has been in place since 1998. Taxing the internet isnt going to help drive penetration or adoption. There is a wireless tax m moratorium and we think that is long overdue. The general sales tax rate is nationally about 7 . Varies by state. But that is average. The average tax on a wireless bill is 17 . That makes no sense. Information driven economy why we would tax a critical information input at twice the rate of other goods and Services Makes no sense other than we are lugging a taxing system around from the bell days. Taxing the phone didnt matter because it was a good way to raise money. That got drafted on the wireless system and we have been with it 20 years. The thought was only rich people have phones. Now there are 335 million accounts in america. Taxing that service at twice the rate of other services doesnt make sense. A couple things we are working on in the tax space is the tax fairness act that is intended to provide a template under which states get guidance about taxing Digital Goods. If you have a download from california that is passing through oklahoma to me on the way to new york city. Who gets the taxes . It cant be all four and the Digital Goods bill answers that question. And Corporate Tax reform. If you invest 25 30 billion in the network, the vendor credit is important and getting long term answers about those issues and trying to reform the tax system to get the rate down to make us competitive is more likely. That doesnt happen this year but we are starting the conversation. Host jot carpenter, a lot of regulation action is done at the state level rather than the federal, isnt it . Guest some. We are different than the wireline industry and thankfully we are lightly regulated. The states are doing plenty of things around our business. We prefer with regulations, they be done at the federal level once, we want to be able to build your plan once and have one advertising campaign. You dont want a different rate for each service in each state. But we think about a Competitive Industry and you dont need a lot of regulations. Companies keep other honest and bludgeon each other to keep business. You have seen a slew of new promotion come out and to the benefit to the consumer you have never had more choice among plans, handsets, and there is something for everybody out there. That says there is not for a regilat regilator regulator. Host 40 of homes dont have wire lines. Will it not be the common carrier . Wireless to the extent of Voice Service is a common carrier today. We are treated differently within the broadband space. At what point are we the replacement for the Wireline Network . Consumers are voting every day and there is a significant amount of the population that says they dont need a wireline device. If you look at the population under 30, many never have a relationship with a wireline company. And that maybe true in the broadband space. You see a number of folks that use wireless devices and they are on ramp to the internet and that is the only connection they have. And among cord cutters an increasing number of people watching video on their tablet or whatever. But the mobile platform is the platform of choice and we think that is an exciting thing and says something good about the future. Host jot carpenter was our guest and Paul Barbagallo was the editing manager at bloomerin