President Donald Trump has declared himself to be a champion of the working class and small business interests, vowing a return to the heyday of American manufacturing and small town economic strength. But when it comes to stimulating good paying, long-lasting middle class jobs Trump and Ajit Pai, Trump’s appointed Federal Communications Commission (FCC) Chairman, are faced with a stark decision in the upcoming months: Either uphold and enhance an Obama-era decision to open up a wireless spectrum band to hundreds, potentially thousands of small, entrepreneurial businesses from all across the country, or change the rules in the carriers’ favor.
The FCC’s Plan for Economic Growth via Wireless Broadband Deployment
A year before Mr. Trump’s September 2016 speech in which he promised to create 25 million jobs over the next decade, the FCC commenced implementation of a program that would enable small telecommunications carriers to compete against larger incumbent companies to provide wireless broadband service to underserved areas, including small towns and rural areas all across the United States. The plan, which facilitates small-area “census tract” licensed, as well as unlicensed, use of the 3550-3700 MHz (3.5 GHz) band, is structured to economically reward the efficient provision of wireless broadband service in rural America and other less populated areas, resulting in more jobs and economic growth in parts of the country desperately in need of revitalization.
The Economy Needs All Americans to Have Access to Wireless Broadband
There is a glaring economic need for wireless broadband in sparsely populated and otherwise underserved areas. According to the FCC, 39 percent of rural Americans — 23 million people — don’t have access. Those who live in rural areas and small towns are about twice as likely not to use the internet as urban or suburban Americans. Because the internet is so central to modern life, areas that lack reliable broadband internet access cannot, among other things, access job applications, banking, newspapers, shopping, college courses, and remote health care services. Moreover, rural communities often face daunting logistics problems installing fiber-optic cable in sparsely populated areas.
It is good business for rural and small town America to have wireless broadband. A 2016 study from the Hudson Institute that found that 66 percent of the economic impact of rural broadband went to urban economies rather than rural ones, given that many of the supplies needed to build these remote networks are sourced from urban areas. The same study estimated that if broadband was as good in rural areas as it is in urban ones, online retail sales would be “at least $1 billion higher.”
Larry Downes, project director at the Georgetown Center for Business and Public Policy, and distinguished internet analyst stated that by virtue of excluding some, the Internet’s value as a network of connection was being diluted. “Any time we add one more person to the internet, we get that many more possible connections of people, so that has greater value. The more you create second-class citizens, the more we just continue to see some of these political [and economic] divides.”
In addition to the above-stated economic benefits, wireless broadband has solid potential to bring small businesses to rural areas, which could thrive in their low-cost environments. Young people would be encouraged to stay in the towns they grew up in, with economic opportunities that result from wireless broadband.
T-Mobile Wants to Change the Rules
Unfortunately, the FCC’s ambitious program, designed to remedy the American digital divide, is now under seige. T-Mobile recently filed a petition for rulemaking with the FCC that would gut the entire plan. If adopted, T-Mobile’s petition – which calls for doing away with the unlicensed portion of the 3.5 GHz band, auctioning off the entire band as licensed service, implementing large licensing areas, and giving licensees 10 year licenses with renewal expectancy – would virtually ensure that only the largest mobile network operators (MNOs) could use the 3.5 GHz spectrum. Smaller carriers would be completely priced out of the market. T-Mobile also advocates economic incentives that would strongly discourage the provision of wireless broadband service to underserved areas.
Disturbingly, other large MNOs such as Verizon, AT&T, and U.S. Cellular filed comments supporting key provisions of T-Mobile’s petition. And, at least one FCC Commissioner, Republican Michael O’Reilly, has strongly indicated his support for T-Mobile’s plan.
In short, if the FCC implements T-Mobile’s proposal, President Trump’s pledge to create millions of jobs will be dealt a serious blow. If the big MNOs win, they and their shareholders will substantially benefit, but little or nothing will be done to increase the number and quality of jobs that would otherwise be created if 3.5 GHz spectrum is open to small businesses all across the country.
The Economic Devastation of T-Mobile’s Plan
T-Mobile contends that licensing and auctioning off the entire 3.5 GHz band will benefit American consumers by raising a few billion dollars to reduce the national debt and providing more spectrum for the large MNOs to deploy wireless broadband. Additionally, the carrier claims the changes would give greater certainty to investors in the large MNOs.
By contrast, the negative effects of T-Mobile’s proposal on jobs and small businesses are many. Without unlicensed 3.5 GHz spectrum, smaller carriers wishing to provide services for the Internet of Things (IoT) and other unlicensed services will be forced to utilize the already overcrowded WiFi frequencies, thereby increasing the probability of interference and inefficient service. The proposed Partial Economic Areas license areas (PEAs – approximately 178 times larger than the existing census tracts) will price smaller carriers out of the market and discourage the large MNOs – the only ones who can afford to successfully bid for these large area licenses – from providing service to small towns and rural areas. Similarly, the suggested ten-year license period with renewal expectancy will encourage the large MNOs to hoard spectrum and discourage them from providing innovative services, which will surely decrease the need for more workers to develop and deploy the services that would be provided by smaller carriers serving small towns and rural areas.
And the list goes on. The investments and deployments of smaller operators in reliance on the existing rules would be eviscerated. Many small operators have already invested in equipment and infrastructure capable of utilizing the 3.5 GHz band under the current rules. Many of these smaller providers are supporting build-outs that will deploy broadband service to unserved small towns and rural areas. They cannot do this under T-Mobile’s plan.
The investments in reliance of the existing rules by equipment manufacturers and technology companies will also be gutted. One technology company has reported that it is deploying over 1,500 3.5 GHz-ready base stations with more 200 predominantly rural broadband providers, intended to serve many thousands of residents in underserved communities. T-Mobile’s proposal will stop this type of deployment cold.
Will President Trump Keep His Word about Creating More Jobs?
The 3.5 GHz proceeding presents a stark choice for President Trump. Will he keep his promise to create jobs for Americans by taking action to preserve the current FCC rules and ensure that small businesses can deploy wireless broadband to underserved areas in the U.S., or will he side with T-Mobile’s proposal, which seeks to concentrate power, control, and money in the hands of the few large MNOs to the detriment of a competitive small business market?
The evidence shows that small business development and economic growth depend on universal access to wireless broadband. Consequently, it is critical that the current 3.5 GHz rules remain intact. If the T-Mobile proposal is adopted, it will demonstrate that while this Administration talks the talk about jobs and favoring Main Street over Wall Street, when the time comes for action, it is part of the swamp that President Trump proclaimed he’d drain.
Jonathan S. Marashlian is the Managing Partner at Marashlian & Donahue, PLLC, The CommLaw Group. Marashlian is responsible for coordinating and managing staff and attorneys and guiding the firm’s clients through state and federal regulatory requirements, including the coordination, management, and execution of regulatory filings associated with a full range of corporate and regulatory transactions.
Ronald E. Quirk is head of the firm’s Internet of Things & Connected Devices Practice Group, where he focuses his practice on the serving the comprehensive needs of the Internet of Things industry, including contracts and commercial law, privacy and cybersecurity, spectrum access, equipment authorization, tax, regulatory compliance planning, and more.
Filed Under: Industry regulations, Cybersecurity
