The cost of 5G deployment is already high, but some big cities are making it worse by charging telecommunications providers ridiculous fees just to attach wireless equipment to electric poles. But the FCC fixed this problem with a recent order that limits these fees to a reasonable amount. This will save providers billions and free up capital for the investment that’s been needed for years in rural and suburban areas. Now, 5G can make its way into these underserved regions and change the game entirely.
Regulators can do two things to accelerate 5G deployment: make more spectrum available to providers and modernize infrastructure rules to facilitate the deployment of small cells—a container of antennas and cables about the size of a pizza box that can be placed on streetlights or other structures. The FCC has already been freeing up spectrum with some pushback, but its approach to small cells has proven much more contentious and faces resistance from city and state officials. But this order is a critical part of the Commission’s larger plan to modernize regulations surrounding deployment.
The FCC Decision Challenges Cities' Political Power
As it is, cities have total control over who gets to deploy small cells and at what cost. They currently negotiate contracts with providers individually, and larger cities have a lot of bargaining power since providers simply can’t afford to miss out on serving millions of consumers in densely populated areas. Some cities use this leverage to charge providers exorbitant fees. For example, San Jose recently reached an agreement with AT&T allowing the provider to install 200 small cells for $5 million in lease revenue over 15 years, translating into $2,500 in fees per small cell. For context, other cities of comparable size charge much lower rates—Indianapolis a mere $50 and Phoenix $100. So compared to San Jose, these cities have deployed many more small cells and increased their 5G viability.
There is no “market” because municipal governments are negotiating with private companies and have full monopoly control over their “rights of ways”––the legal right of passage over the city’s property.
The new order sets much-needed limits on cities’ power. This boils down to $500 in non-recurring fees and an annual $270 per small cell if the fee is recurring. In an op-ed, San Jose Mayor Sam Liccardo, an opponent of this plan, argues that this order would force cities to pay “below-market” rates. But there is no “market” because municipal governments are negotiating with private companies and have full monopoly control over their “rights of ways”––the legal right of passage over the city’s property. They abuse this monopoly power to charge providers whatever fee they’d like for accessing the cities’ light poles and streetlights. The order simply puts an end to this abuse of monopoly power. Regardless of what Mayor Liccardo says, it shouldn’t be misconstrued as a subsidy for providers.
Enabling Greater Growth
By enacting this rule, the FCC is simply trying to put underserved areas on a level playing field with cities, and in turn, is enabling them to compete for capital investment with cities.
By limiting what large cities can charge providers, this order will free up capital for investment in rural and suburban areas. The Commission estimates that these limits will result in about $2 billion in savings for providers and stimulate $2.4 billion in additional investment. Although any cost savings are great, it is unclear to what degree these savings will flow into rural and suburban areas. This is because it's unclear to providers whether there is enough demand and use for 5G in these areas to warrant investing in them. But the Commission, by enacting this rule, is simply trying to put underserved areas on a level playing field with cities, and in turn, is enabling them to compete for capital investment with cities. This is critical for the success of 5G as, left to itself, 5G could easily worsen the great digital divide that has placed such a vast technological gulf between urban and rural regions.
5G technology can unleash a wave of innovation and economic opportunity for communities across the country. The United States is competing, and currently losing, in a global race to 5G. Since 2015, China has deployed 350,000 cell sites, while America has built fewer than 30,000. China is also deploying cells 12 times faster than America—daily. If the United States wants to maintain its wireless leadership—and reap the immense economic benefit of getting there first—things need to change drastically. This order, an excellent play from the FCC, is an important step toward the kind of change that will do exactly that.