Cities Feel Run Over in 5G Race as FCC Sides With AT&T, Verizon

(Bloomberg) -- San Jose found a way to help the disadvantaged as it struck deals to let AT&T Inc. and Verizon Communications Inc. put antennas on 4,000 city-owned light poles, laying groundwork for super-fast 5G signals while feeding the city’s treasury.

The capital of Silicon Valley gets $750 annually for each pole, and a total of $24 million of the revenue has been pledged toward bringing broadband to unserved neighborhoods.

Too bad other towns won’t be able to do the same thing. The U.S. Federal Communications Commission is poised to vote Wednesday to limit fees localities can charge, tighten deadlines for responding to industry and discourage deals like San Jose’s that fund broadband projects.

Local officials say the proposed rule, which is backed by the commission’s chairman and is expected to pass, unfairly constrains them in negotiations with companies that count revenue in the billions of dollars.

“We are shocked,” Samir Saini, New York City’s commissioner of information technology, said in an emailed statement. The proposed action is “an unnecessary and unauthorized gift to the telecommunications industry and its lobbyists” and an effort “to subsidize a trillion dollar industry under the guise of helping broadband deployment,” Saini said.

FCC Proposal

Under the proposed FCC order, cities couldn’t charge more than it costs them to process applications and manage rights-of-way -- an amount the FCC estimated at $270.

That’s far short of charges in some cities. New York City charges as much at $5,100 a year in Manhattan south of 96th Street, and as little as $148 annually in places where it’s trying to encourage deployment.

The move would also tighten to 60 days, from 90, the time limit for localities to review new small antennas on existing structures, and places a 90-day limit for considering new installations, down from 150 days, according to a summary produced by the agency. The 90- and 150-day limits still apply to large towers.

The FCC says the rule will boost broadband deployment, in part by spreading carriers’ limited deployment funds to more places.

By “reducing excessive local fees” and “addressing unreasonable delays” the FCC will be “taking another critical step to promote U.S. leadership in 5G wireless services,” Chairman Ajit Pai, a Republican, said in a blog post.

Companies are racing to deliver 5G, or fifth-generation wireless service that will perform as much as 100 times faster than 4G. At stake is the potential to grab market share. The service will allow ubiquitous connections for applications such as remote surgery and self-driving cars.

The carriers want cheaper, quicker approval for new gear on public poles, and for putting installations on public medians, in park land and at scenic waterfronts. The FCC’s proposed changes will save companies an estimated $2 billion in unnecessary costs, according to the agency’s draft order.

FCC and industry officials say the antennas to be installed will be so-called small cells, the size of a pizza box or a backpack. But some of the gear is the size of a double-door refrigerator, and new poles can be four stories tall under the proposed rules.

The small cells need to be spaced every few blocks because signals used for 5G fade quickly. It’s expected that 300,000 will be installed in the next three to four years, according to an estimate developed for CTIA, a wireless trade group. The small cells merit eased procedures compared with tall, intrusive cell towers, according to the FCC.

Industry backs the new rules, which closely follow recommendations it put forward.

“We need the FCC to give clear direction to localities on procedures and fees,” Meredith Attwell Baker, president of CTIA, said in a Sept. 12 speech. AT&T lauded “sensible changes” and Verizon said the FCC’s proposal marks “ a bright day for our nation’s 5G future.”

The push comes as government from city halls to the White House make extending broadband a national priority.

In June, San Jose said its agreements with the companies are expected to lead to more than $500 million of private sector investment and help close a digital divide that has left more than 95,000 city residents without broadband at home.

Local Communities

The proposed rule from the FCC is “a tremendous disappointment for local communities,” San Jose Mayor Sam Liccardo said in an interview. “The FCC seeks to put a thumb on the scale to favor industry and mandate de facto subsidies by local taxpayers.”

The non-partisan U.S. Conference of Mayors said it it “strongly opposes” the FCC’s plan as creating “subsidized access to local public property.” The National Association of Counties said time limits for considering applications would hinder reviews for health and safety.

Cities including Boston, Dallas and Los Angeles earlier told the FCC not to establish deadlines or price controls. “Local governments cannot simply give away public property for private purposes,” the cities said in a July filing.

Some localities have expressed support. In Florida, Pensacola Mayor Ashton Hayward III cited in a June 8 letter “common-sense standards insofar as it relates to fees.”

Mayor Michael Taylor, of Sterling Heights, Michigan, in an Aug. 30 letter said there are “significant, tangible benefits to having a nationwide rule” that promotes deployment “without concern that excessive regulation or small cell siting fees slows down the process.”

Lower fees will stimulate investments in more communities, said Brendan Carr, a Republican FCC commissioner who has taken a lead on the issue.

Investment Incentives

"It’s going to take these high fees in a few of the biggest must-serve cities, get them back to reasonable levels, and that capital will then be freed up to deploy in other parts of the country,” Carr said in a Sept. 20 speech.

Others say there’s no evidence that eased fees will produce greater investment in less-populated areas that offer fewer customers, and hence less revenue.

"It’s a total gift to the telecoms,” Blair Levin, a former Democratic official who has advised localities on speeding broadband deployment, said in an interview. “It’s just a wealth transfer.”

Jessica Rosenworcel, the FCC’s sole Democrat, said she hasn’t decided whether to vote for the change. “We need to find ways to streamline and harmonize deployment rules across the country,” Rosenworcel said in an interview. “But we’re going to have to figure out how to make states and localities our partners."

Lincoln’s Fees

AT&T in a filing cited what it called excessive fees charged by many municipalities, including Lincoln, Nebraska, and said that as a result it had “focused more of its small cell operational resources” elsewhere. Verizon in a filing said it had decided to stop installing small cells in Lincoln because of its annual fee of $1,995.

Lincoln pushed back, saying its rates are within national norms, and citing $220 million in private investments in its public rights-of-way.

“We’ve been willing to partner,”said David Young, who manages Lincoln’s rights of way, said in an interview. “Everybody realizes the opportunity and potential of the internet.”

San Jose’s tactic, of using agreements to raise funds for bringing more citizens online, may not be available to other communities under the rules that limit charges to direct costs.

Liccardo, the mayor, said companies aren’t building to serve disadvantage areas.

“I don’t blame any company for chasing the highest profits and installing infrastructure where it will most benefit their bottom line,” Liccardo said. “If no one is expecting the industry to pay for it, then local governments need to be able to have the tools to address a digital divide that is increasingly impactful on economic opportunity.”

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