Blog Post

AEIdeas

The Federal Communications Commission (FCC) will vote later this month on an order to accelerate wireline and wireless broadband deployment by removing barriers to infrastructure investment. It offers guidelines to states and municipalities on covering costs of site and attachment rentals, processing applications and deployments in the rights-of-way, measures to maintain aesthetic and technical requirements, and shot clocks to ensure timely government responses to deployment requests.

This is a welcome development to meet the exploding demand for data services, to catch up in the 5G race with China, and to stimulate competition between different broadband infrastructures. Twenty states have already enacted bipartisan legislation to speed small cell deployment, Congress introduced the bipartisan STREAMLINE Small Cell Deployment Act, and many cities are on track to deploy 5G technologies for home broadband markets by the end of the year. While the US has demonstrated success with private provision for infrastructure — historically the US with just 4.5 percent of the world’s population has enjoyed almost 25 percent of global broadband network expenditure — there is still an important role for FCC policy. The upcoming order demonstrates the classic justification for regulation: notably facilitating market entry, providing information, and mitigating abuse by special interests.

Facilitating market entry

Market entry is very costly for communications providers: They must purchase licenses, negotiate rights-of-way, build infrastructure (by erecting towers or laying wire), meet commitments for quality and coverage, and adhere to a complex set of rules, reporting, and operating requirements from regulatory authorities. Unsurprisingly, relatively few firms enter the market and are reluctant to expand. The goal of the Telecommunications Act of 1996 was to lessen that considerable burden and encourage more competition by removing regulatory barriers to entry. Its conference report noted it would “provide for a pro-competitive, de-regulatory national policy framework designed to accelerate rapidly private sector deployment of advanced information technologies and services to all Americans by opening all telecommunications markets to competition.”

Since the 1996 Act, networks have evolved, with new and fundamentally different architectures and typologies. Many 5G networks are predicated on multiple small cells the size of shoeboxes attached to street poles, rather than giant mobile towers. As such, the FCC is modernizing its implementation of the statute given new technology.

For example, Section 253 of the 1996 Act allows state and local governments to manage public rights of way with fair and reasonable compensation from telecommunications providers on a competitively neutral, nondiscriminatory, and transparently disclosed basis, but terms and conditions cannot prohibit or effectively prohibit the ability to provide telecommunications. Importantly, after notice and comment, the FCC can preempt state and local efforts if the local requirement violates the statute. Section 332(c)(7) balances the FCC’s power with local authorities on the placement, construction, and modification of wireless infrastructure provided that the latter does not unreasonably discriminate among functionally equivalent services, effectively prohibit the provision of service, unreasonably delay requests for deployment, or contravene federal radio frequency emissions requirements.

Ensuring information is available

For the most part, states and municipalities welcome private investment. They want their residents to have access to competitive, next-generation technologies from multiple providers and they want to conserve scarce public resources. However, local leaders are not necessarily experts in deploying new technologies and infrastructures, and given their other priorities don’t necessarily have the time or wherewithal to become experts. The FCC, through the knowledge of the many states, its Broadband Deployment Advisory Committee, and its public comment process which has collected more than 1100 submission in more than a year, has sought to close this knowledge gap by gathering and codifying best practice information. Rather than having every town in America reinvent the wheel of next-generation infrastructure, it makes sense for the FCC to present the right policy to educate states and municipalities.

Mitigating abuse by special interests

Ensuring information and transparency is important to avoid manipulation and abuse by special interests. Not all state and local actors are similarly situated financially and some wish to manipulate the process of delivering the public good of communication for particularly pecuniary interests. Many cities and states have crushing debt from failed municipal projects and pension liabilities and see a private company deploying infrastructure as a revenue opportunity. Some proffer that the “free market” gives them the right to charge high rental fees, but pole attachments are not a market as such: cities monopolize the ownership of street polls and rights-of-way.

Successful telecommunications policy attempts to deliver the public good of communications to as many people as possible at competitive prices, so we need to encourage fast, efficient, and ubiquitous delivery of connectivity. When cities charge extraordinarily high rates that only one company can afford, the possibility for competition between multiple providers is undermined. Moreover, the high cost of deployment in cities reduces the ability to deploy in suburban and rural areas, widening the digital divide. The best way to ensure mass build-out is to keep costs low. Importantly, the FCC’s One Touch Make Ready policy ensures that access to utility poles for 5G is swift, predictable, and affordable. All Americans should have the opportunity to take advantage of next generation networks, not just those in cities.

Finally, the economics of 5G are still evolving. As we learned from 3G/4G economics, third party app and service providers (e.g. Google, Facebook, Netflix) benefit disproportionately more than the network providers themselves, but third party providers do not contribute to the cost of local infrastructure. Thus, it is important to allow two-sided markets to recover some fees so consumers don’t foot the full bill of infrastructure. The sooner networks can get up and running, the sooner they can contribute to a city’s economic development and tax revenue.

On September 17, AEI will host FCC Commissioner Brendan Carr and an expert panel to discuss the future of 5G wireless and the FCC’s efforts to clear regulatory hurdles to ensure US leadership in 5G deployment. RSVP for the event here.