Summer Reading: C-Band by the Seaside

Ross Marchand

August 23, 2019

In the waning weeks of summer, members of Congress trying to show off their many shades of bronze will undoubtedly pose for the camera and post their pictures on Facebook (hopefully not on their official “representative” pages!). They will inevitably discover, however, that the reception and internet coverage near the shore isn’t exactly the gold standard. Fortunately, internet coverage across the country is quickly changing for the better thanks to the rapid rollout of 5G. But these changes depend on continued leadership from lawmakers and bureaucrats at the Federal Communications Commission (FCC). 

In particular, broadband providers need to be sure that they’ll have enough bandwidth to get new internet connectivity standards up-and-running. Economic benefits – particularly for the internet of things and healthcare sector – will be immense if the federal government can free up enough spectrum to accommodate 5G (which promises to be at least ten times faster than 4G). Mid-band (or “c-band”) spectrum is the Goldilocks zone for 5G since mid-band radio waves can transmit internet data over long distances while still carrying large amounts of information. Normally, spectrum is auctioned by the government and bidding reveals the underlying market value of each sliver of radio waves. 

This system, adopted in 1994 following the failure of the old command-and-control system of spectrum allocation, has been a resounding success. Economists Thomas Hazlett, David Porter, and Vernon Smith write, “Thanks to changing technologies, evolving political equilibria, and the intellectual consensus that Coase fundamentally reshaped, policy makers around the globe have begun treating the spectrum allocated to mobile telecommunications licenses as de facto private property. Decades of experience with comparative spectrum ownership institutions are now available for observation. The liberalization of private property rights has yielded extremely large social gains, permitting complex market structures to develop. No other form of spectrum allocation, including the ‘command and control’ once thought necessary to avoid tragedy of the commons or the ‘spectrum commons’ recently heralded as the obsolescence of Coasean property rights, supports such productive social coordination.”

Yet a small consortium of satellite companies called the C-Band Alliance (CBA) wants to undermine this robust system by taking c-band spectrum from the FCC without any real commitment to pay for it. This government-granted monopoly would then sell the spectrum on their own terms and pocket the proceeds while barring other spectrum holders from benefiting. CBA executive vice president Peter Pitsch claimed to Congress on July 16 that the consortium would make a “significant voluntary contribution to the U.S. Treasury.” This, of course, is a significant departure from ordinary market transactions, where companies agree to a binding price before a sale proceeds. But Pitsch’s “pitch” seemed at odds with prevailing opinion among CBA’s members.

In August, Eutelsat CEO Rodolphe Belmer stated that, in regards to the “voluntary contribution,” “There is no real agreement and alignment on that question within the CBA, contrary to what has been said in some instances recently…What I can tell you is that this voluntary contribution to the U.S. Treasury is not part of the scope of the CBA. It needs to be discussed and aligned within all the members of the CBA, meaning the four of us, and for the moment there is no alignment on that.” 

Having that valuable of an asset sold off by an artificial monopoly without any payment guarantee to U.S. taxpayers – the ultimate owner of the spectrum – would create skewed incentives where companies sit on valuable spectrum until they too can “inherit” the real estate via consortiums devoid of any real competition. This doesn’t bode well for future, high-speed internet deployment, particularly when the size of the spectrum to be sold by CBA simply isn’t enough to deliver the goods of 5G. 

Analyzing the plan, Forbes columnist Fred Campbell writes, “The plan proposed by the CBA—a group of international satellite operators who hope to earn $20-$25 billion by acting as a private broker for the sale of C-Band spectrum—would free up a mere 180 MHz of mid-band spectrum for 5G. That’s not nearly enough for the FCC to offer even one 100 MHz channel to each of the four (or three) nationwide mobile operators, let alone the many regional operators and wireless internet service providers that serve the same markets.” 

Instead of this opaque, lopsided “sale,” the FCC should facilitate the rise of 5G by transparently auctioning off c-band spectrum to the companies that would make the most efficient use of the resource. But 5G deployment policies must address more than the spectrum or lack thereof on the market. Across the country, localities are stymying the small cell (pizza box sized) deployments on telephone poles critical to 5G access. Over the past few years, news outlets have highlighted horror stories of cities such as San Jose, Calif. charging companies thousands of dollars to tether a small cell deployment onto a pole. 

These excesses prompted the FCC to release a plan in 2018 capping local fees to $270 per year. Ars Technica explains, “That doesn’t mean cities can’t charge more, but the FCC says they have to prove that the fees are a reasonable approximation of all costs and are ‘non-discriminatory.’” Now, cities such as Rochester, N.Y., are flat-out ignoring that order and gouging broadband providers $1,500 per pole attachment. Providers will understandably sue for their right to reasonable fees, but the legal uncertainty clouding this process will slow down 5G deployment and put the U.S. behind other countries moving toward new internet standards at light-speed. 

Congress and the FCC must continue to stand with broadband companies and consumers and fight for lower barriers to 5G deployment. And, lawmakers and bureaucrats alike should push for a transparent auction process that will free up enough spectrum to make 5G a reality. Even members of Congress deserve the right to be able to upload selfies onto their (private) accounts. 

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