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Op-Ed: The FCC is Helping to Bring 5G to All Americans

By dmiyares | September 20, 2018

No matter how good wireless technology is, American consumers want it to be better, faster, and cheaper.  Fifth generation wireless technology–called 5G–can do that.  With more capacity, less buffering and delay, and much higher speeds, 5G will transform the lives of Americans by opening the door to new applications in medicine, education, manufacturing, agriculture, vehicle automation, entertainment and many other fields.

The deployment of 5G requires three key components:  more spectrum, more cell sites, and more capital.  5G can operate at higher frequencies than current wireless technologies, using frequencies that were previously considered impractical for commercial wireless applications.  The good news is, there is potentially a lot of spectrum available at high frequencies and the Federal Communications Commission (FCC) is working hard to open it up for 5G.  The FCC is also facilitating deployment of 5G cell sites.  It will consider an order at its September 26th open meeting that will make that process faster and more economic.  That, in turn, will encourage investors to provide capital for 5G. 

Wireless generations 1G through 4G used relatively low frequencies that can travel great distances.  Ensuring coverage with generations 1G to 4G was best achieved by placing antennas on towers as tall as 200 feet that were located several miles apart. The higher the frequency, however, the shorter the distance the signal travels effectively.  Thus, 5G cell sites have to be placed more closely.  5G requires small antennas and equipment, which can be mounted on low poles, such as the poles we see on every street that carry utility equipment or traffic lights. 

Thus the small cell sites needed for 5G are far less obtrusive than the macro (i.e., large) cells needed for prior generations of wireless technology.  At the same time, because the small cells that serve 5G can only serve a very small area, many more are needed.  At year-end 2017, the U.S. had roughly 323,000 cell sites, most of them macro cells.  Of those, only about 76,000 were deployed in the last eight years, while 4G—the current generation of wireless technology– was deployed. 

For 5G, it is estimated that as many as 800,000 cell sites will have to be deployed by 2026 to cover the U.S. and provide enough capacity for the demand Americans will place on their wireless carriers.  In other words, instead of about 10,000 cell sites per year, carriers will have to place as many as 100,000 per year.

This massive deployment of small cells cannot happen without rapid and economic placement of the cell sites.  Every cell site has to be approved by the locality in which it is placed and the cost and speed of that process can vary enormously.  The charges can include up-front fees such as application fees as well as recurring fees or even a percentage of the carrier’s revenues.  And there can be charges that do not have any relationship to the cost of deployment. 

A study conducted at the University of Pennsylvania Law School and the Center for Technology, Innovation and Competition found a tremendous range of charges for pole attachments.  While the median annual fee for wireless pole-attachment in the sample it examined was $56.60, the mean was $505.56 and the range was $6,299.77.   A study by CMA Strategy Consulting shows an even wider range of annual attachment fees, a range from $0 to $37,000.  CMA also shows up-front application fees that range from $100 to $24,000. 

The City of San Jose provides an example of a charge that is unrelated to the cost to the locality of deployment.  San Jose obtained a $24,000,000 contribution by wireless carriers to San Jose’s Digital Inclusion Fund, as part of the City’s agreement to allow the carriers to use its light poles for small-cell deployment.  Other communities have required “in-kind” contributions, such as a network dedicated to the municipality’s exclusive use.

Site approval time frames can also vary enormously, despite an FCC shot clock established in 2009 that requires a yes or no decision within 90 days for collocation on an existing site or 150 days for a new site.  Some localities take as much as twelve to twenty-four months to respond to a single application.  A key variable is the shot-clock trigger.  Is the shot clock triggered when the application is filed or when the locality deems it complete?  What if the application is incomplete because the locality decides after the application is filed to impose new requirements?  How do pre-application discussions and reviews fit in?  How do multiple review processes, e.g. a locality’s aesthetics review or its health and safety review, fit into that shot clock—can they be sequential or must they be simultaneous?

The FCC has posted a draft of the order it will consider on September 26.  Twenty states have passed legislation to regulate the process of small-cell approval.  The FCC’s draft order takes those into consideration.  The draft order recognizes that various localities may have varying costs and need varying time lines, so it allows for rebuttal even as it establishes safe-harbor charges and shot clocks specifically for small cell sites. 

The FCC’s draft order requires charges to be based on reasonable costs and to be non-discriminatory. A locality can charge its cost of reviewing an application, for example, or costs such as maintenance of its rights-of-way or its poles, as long as those are reasonable.  The draft order establishes safe-harbors, i.e. charges that are presumed to be reasonable.  The safe-harbor fees proposed by the FCC are at the high end of those established by the states which have small-cell legislation, i.e. thus giving the localities greater flexibility than some of the states.

The FCC safe-harbor for a single up-front applications that includes up to five small cell sites is $500 with an additional $100 for each additional site included in that application.  The safe-harbor per small cell site per year for all recurring fees, including any right-of-way (ROW) access fee or fee for attachment to municipally owned structures in the ROW is $270.  The draft order does not allow different charges for similar applications, i.e. discrimination.  Nor does it allow charges or demands for in-kind contributions that are not justified by the cost of the deployment to the locality.

The draft order establishes a shot clock of 60 days for approval of a collocation on an existing site and 90 days for a new site.  The draft order clarifies that the clock begins when the application is submitted and applies simultaneously to all the processes required for issuance of permits.  The clock can be stopped if the application is incomplete and the applicant is informed of the deficiency within 30 days.  However, the locality must publish all of its requirements prior to the application’s submission—i.e., a locality cannot delay a pending application because the locality has created new requirements.

Over the past eight years, the U.S. wireless industry has spent roughly $230 billion to deploy 4G, and in that process added about 76,000 cell sites in total, i.e. an average of less than 10,000 per year.  Over the next eight years it may need ten times as many sites.  Raising the capital to fund that build-out requires confidence by investors that 5G will be deployed rapidly and economically. 

The FCC’s draft order balances nicely the operational requirements of local governments with their citizens’ need for the state-of-the-art wireless technology and applications that will enhance their lives. By facilitating the deployment process, the FCC’s draft order will help carriers raise the capital they will need to deploy 5G to all Americans. It will also help the U.S. to become the leader in 5G as it has been in 4G.

Anna-Maria Kovacs, Ph.D., CFA, is a Visiting Senior Policy Scholar at the Georgetown Center for Business and Public Policy. She has covered the communications industry for more than three decades as a financial analyst and consultant. 


Filed Under: Wireless Week

 

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