The Federal Communications Commission claims to be focused intently on improving mobile internet access by incenting the big wireless companies to invest in 5G. To that end, the FCC has shifted billions of dollars from local governments to the big companies – but the result appears to be less investment from the big carriers and a bigger tax burden on communities.
FCC Commissioner Brendan Carr has claimed again and again that lowering small cell permitting fees is the key to encouraging 5G deployment. Carr argues that not only are municipal governments overcharging for wireless carriers to access public rights-of-way, but the cost of attachment in cities makes it too expensive for carriers to invest in rural communities.
Carr’s argument is based on unrepresentative, cherry-picked examples and otherworldly economics. The notion that charging a private company less in one market would lead to investment in less lucrative markets is unsupported by facts or economic theory.
5G networks require 1) a high number of small cells to be deployed closely together, and 2) fiber backhaul to connect them to the internet. This approach works well in densely populated urban areas – and does not fit rural communities. Further, small cells are designed to operate over shorter distances, again limiting 5G’s usefulness in rural regions. Lowering fees in urban areas simply will not transform 5G technology into a rural solution.
Despite this, in September the FCC passed an Order led by Carr that severely limits municipal decision making. A key part of the Order effectively limits annual lease rates to $270 per small cell – significantly lower than the market rate in most communities. Recent research supported by Next Century Cities found that among municipal governments surveyed, the average annual lease rate was $1,438 per attachment. Mobile wireless companies like Verizon found these terms to be reasonable in open negotiation.
Municipal governments of all sizes, geographies, and political leanings – in addition to public interest advocates and industry analysts – have spoken out against Carr’s actions to limit local rights. Boston’s Mayor Martin Walsh was clear in saying “Benefit from private companies should not come at a cost to the taxpayers of Boston and should not strip local municipalities of their ability to oversee public rights of way.”
Nonetheless, Carr promised that the lower fees would lead to faster, more ubiquitous 5G deployment: “Cutting these costs changes the prospects for communities that might otherwise get left behind.”
But as many times as Carr says it, the economics don’t change. Rural communities aren’t going to get 5G for a long time. No one is rushing to invest in low-income neighborhoods. And Verizon just proved this point.
On its most recent quarterly earnings call, Verizon’s Chief Financial Officer addressed the impact – or lack thereof – of the new rules: “[The Order] doesn’t necessarily increase the velocity that we see [in deploying small cells]… I don’t see it having a material impact to our build out plans. We’re going as fast as we can.”
Verizon and the other carriers are under no obligation to be honest in pushing the FCC to lower the fees they pay local governments for access to the public’s rights-of-way. But they are legally compelled to be honest in communications with investors. So when Verizon admits that its share of a $2 billion windfall from communities will not change its investment plans – or when AT&T states that it is not expecting significant revenues from 5G service in the near future – we should listen.
The FCC Order does not speed deployment of 5G, and it does not make 5G any more viable for rural communities. Here’s what it does accomplish: It steamrolls local control and moves money from communities to Verizon’s shareholders.