FCC rule change would harm rural broadband expansion

January 9, 2018 Cheryl Bolen

This analysis was first available to Bloomberg Government subscribers

A rule change proposed by the Federal Communications Commission would halt a major expansion of broadband into rural areas at the same time the Trump administration is looking for ways to bring more broadband into the countryside.

“Obviously, spectrum use is going to be critical to rural broadband rollout, and we hope that there will be equitable consideration for different types of use of spectrum,” a senior administration official told reporters Jan. 5 while discussing a new report on the administration’s plans for boosting economic growth in rural areas.

The FCC is currently reconsidering a rule adopted unanimously in 2015 that would govern the use of spectrum in the 3.5 GHz band, known as Citizens Broadband Radio Service (CBRS) spectrum.

The rule is highly unusual, in part because it adopted small license sizes covering a single census tract in order to give rural broadband providers, industrial users, universities and businesses the ability to buy licenses.

But after two years spent developing technical standards for using the spectrum, FCC Chairman Ajit Pai reopened the rule last October, proposing instead large license sizes that only the national wireless carriers, such as Verizon, AT&T, T-Mobile, and Sprint, can afford.

The reopened rule pits small internet service providers (ISPs) that operate in rural areas and need the spectrum to serve geographically hard-to-reach customers against the large mobile carriers who want the spectrum to upgrade to 5G service.

Problem, Meet Solution

“Reliable and affordable high-speed internet connectivity will transform rural America as a key catalyst for prosperity,” said Secretary of Agriculture Sonny Perdue, in releasing a report Jan. 8 from the Task Force on Agriculture and Rural Prosperity.

The FCC has estimated about 39 percent of rural Americans do not have access to quality broadband, said Grace Koh, special assistant to the president for technology, telecom, and cybersecurity policy.

That is primarily because there is little incentive to build out when the costs of deployment are high, there is little promise of return, and the revenue base is small, Koh said.

While this is true for large broadband providers, there are more than 1,500 small, wireless ISPs offering the only source of terrestrial broadband to millions of rural Americans.

Already small entrepreneurs are investing private capital to solve what many people would agree is one of the most pressing policy priorities, which is getting broadband to rural America, said Jimmy Carr, CEO of All Points Broadband, in Leesburg, Va.

“Here we have private entrepreneurs building small and medium-sized businesses, the engine of the American economy, willing to invest their own private capital, not government subsidies, in solving this very complex but pressing problem of bridging the digital divide,” Carr told Bloomberg Government.

Carr is on the board of directors of the Wireless Internet Service Providers Association, which is opposing the rule change at the FCC.

Customers Waiting

In some areas, there can be 1,000 rooftops underneath the propagation area of one of his company’s towers, Carr said.

But, because the company is limited to high-band 5 GHz spectrum for last-mile connections, which can’t get through trees, it can only actually deliver service to about half of those households, he said.

With access to mid-band spectrum, such as the 3.5 GHz CBRS spectrum, the company would have the ability to reach 800 to 900 or more of those homes, Carr said.

“And this is where the digital divide lives—exactly those customers,” Carr said.

These potential customers live in an area where the company has network equipment, has signed tower leases and has trucks rolling all the time, “and all I need is the ability to bid at auction—in an auction that isn’t stacked against me—for that mid-band spectrum,” Carr said.

“I just don’t understand and no one has offered to us a compelling narrative about what’s wrong with the current rules,” he said.

FCC Looking Out for 5G

The reason the FCC reopened the rule, the agency said, is that it has become increasingly apparent that the 3.5 GHz band will play a significant role in the development of 5G network deployments throughout the world.

The proposed rule change drew 190 public comments by Dec. 28, and reply comments are due (Docket No. 17-258) by the end of January.

“We look forward to working with the FCC on updating the 3.5 GHz band rules so that the licensing framework promotes investment in better and faster wireless services for consumers in urban and rural areas,” said Kara Graves, director of regulatory affairs at CTIA, which represents the national wireless carriers.

“The commission’s proposals will enable wireless providers to increase infrastructure investment, support the deployment of next-generation 5G networks, and enable the U.S. to maintain its leadership in wireless,” Graves said.

Free-Market Solution

If the FCC goes forward with the proposed change, it would be picking winners by tailoring all of the CBRS licensing rules to the business case of a very small set of national operators, said Dave Wright, director of regulatory affairs and network standards at Ruckus Networks, in Sunnyvale, Calif.

The losers would be everyone else interested in using the spectrum to provide a service, including fixed wireless ISPs, cable operators, industrial customers, enterprise operations, the hospitality industry, stadiums, hospitals, and universities, among others, Wright said.

The innovative idea behind the CBRS rule was that market forces would determine how much of the spectrum was used exclusively, how much was used permissively, and there would be a recurring reassessment of the highest use of the exclusive rights through more frequent auctions, Wright said.

“And so it was much more a free-market approach to spectrum management than this heavy-handed regulatory fiat where the FCC will decide this is the plan for the band and it’s going to be statically tied up that way for decades,” Wright said.

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