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States and Cities' Battle for Control of 5G Reaches the FCC

The FCC will vote on an order next week that would invalidate many local and potentially some state agreements with internet companies.

Back in 2016, several major phone carriers approached the city of McAllen, Texas, about building state-of-the-art 5G wireless networks. With the promise of ultra-fast internet connection speeds and an array of potential commercial and public applications, city officials eagerly entered into discussions about amending local ordinances to accommodate the necessary infrastructure. Months later, they were close to reaching an agreement on establishing a large-scale pilot program.

It all started to unravel, though, when McAllen and other Texas cities heard about a proposal in the legislature setting statewide rules for 5G installation and prohibiting local governments from negotiating their own deals. McAllen City Attorney Kevin Pagan says the wireless providers initially assured him they weren’t interested in asking for state legislative help. But then the bill started gaining traction. Company representatives stopped responding to Pagan’s emails about the licensing agreement, and he says he hasn’t heard from them since.

The legislation sailed through both chambers and was signed into law last spring. McAllen has joined other Texas cities as lead plaintiff in suing the state over the bill. “I’d like to say it was a fight, but when the score has already been determined in advance before the starting gun goes off, it’s difficult to call it a fight,” Pagan says. “Nothing that we suggested of any substance was [included] in S.B. 1004.”

Across the country, telecom companies are beginning to lay the groundwork for 5G wireless networks. The buildout often pits states against cities, as in Texas. But a proposal that the Federal Communications Commission (FCC) is set to vote on Sept. 26 would not only upend future local agreements, but also preempt states. If approved, localities across the country would have drastically less authority over 5G infrastructure. 

The arrival of 5G represents a major advancement in wireless technology. It’s expected to provide speeds at least 10 times faster than the typical 4G connection that many places now have. Testing is underway in select cities, and the FCC will start auctioning licenses for 5G spectrum in November. The first 5G-compatible smartphones are expected to follow next year.

Some localities are already looking to use the technology in ways that go well beyond improving internet speeds. Kansas City, Mo., partnered with Cisco and Sprint on building a public Wi-Fi network covering part of the city’s downtown. It supports pedestrian sensors and interactive kiosks along a streetcar line. Bob Bennett, Kansas City’s chief innovation officer, envisions a litany of potential future applications once 5G is enabled. Air quality and temperature sensors detecting pollution, he says, could play a role in determining where kids wait for buses. Others have hailed 5G as crucial for transmitting data to autonomous vehicles. 


FCC Chairman Ajit Pai has repeatedly hinted that he would scale back state and local authority over small cells.

The key building blocks of 5G networks are small-cell antennas interwoven throughout city infrastructure, affixed to streetlights, utility poles or buildings. Providers typically describe them as the size of pizza boxes. But in actuality some of the antennas are much larger, while others are hardly noticeable at all. They generally need to physically connect to wireline fiber, so the first places expected to get 5G are densely populated urban areas with high consumer demand and existing fiber networks. One study conducted by the municipal advocacy group Next Century Cities, of jurisdictions considered to be leaders in technology, reported that 60 percent of communities with a wireline fiber connection to residences had small cells in place, while the same was true of only a third of those without existing fiber.

Unlike cellphone towers, small-cell nodes have limited range and poor ability to send signals through physical barriers. So telecoms may need to install hundreds of small cells to cover a relatively small area -- an undertaking that becomes cost-prohibitive in less urbanized areas. For this reason, Blair Levin, a former FCC official who oversaw the National Broadband Plan, says 5G is likely to further widen the digital divide that has disadvantaged parts of rural America.

Supporters of the FCC proposal and state laws governing 5G frequently maintain that the laws will speed up construction, as well as potentially facilitate its use in currently unserved areas. In their pitches to Nebraska state lawmakers last year, lobbyists argued that a statewide rule would accelerate rural deployment. Citing comments provided by telecom providers, the FCC proposal similarly concluded that “resources consumed in serving one geographic area are likely to deplete the resources available for serving other areas.”

But local officials contend that carriers won’t bring their 5G networks to outlying areas absent market demand. “There is not a shred of evidence that suggests a penny saved in New York immediately gets invested in Montana,” Levin says. McAllen’s Pagan adds that his city offered companies a “healthy subsidy” to deploy internet service in unserved areas, but they weren’t interested.

What’s certain is that the FCC wants to lower the cost of deployment. As of early this summer, 20 states had enacted legislation aimed at facilitating 5G small-cell deployment, according to the National Conference of State Legislatures. FCC Commissioner Brendan Carr has stated that the order wouldn’t alter nearly any provisions of the 20 existing state laws. But any that do not satisfy the proposed federal rules would be preempted.


Source: National Conference of State Legislatures

One major point of contention is the fees localities charge providers to mount small cells on poles and other public infrastructure. Cities argue that they should be able to charge carriers market rate fees based on land values or the value of nearby private property. State legislatures usually set much lower caps on the annual fees that localities can charge telecoms for each pole.

Texas state Sen. Paul Bettencourt, a Houston-area Republican who co-sponsored the Texas bill, believes local governments should levy only limited administrative fees. “We just don’t need to make this a major revenue source,” he says. “We should keep government out of the way of technology and let technology get us all there.”

Before the state law passed in Texas, Houston was charging $2,500 per small-cell node annually, while San Antonio was charging $1,500. The state law sets the maximum right-of-way rate at $250 per network node. For a large city with potentially thousands of nodes once the technology is fully implemented, the difference amounts to millions of dollars a year. Nationally, jurisdictions surveyed for the Next Century Cities study reported a median lease rate of $1,200 per pole, with areas of high-priced real estate levying much higher fees.

Separately, video and cable companies pay Texas localities franchise fees based on their gross revenues for using public rights-of-way. Under the new state legislation, the Texas Municipal League fears that lower fee caps will incentivize cable companies to convert to 5G or wireless internet, meaning franchise fee revenues could one day disappear. Dallas, for instance, would lose up to $40 million annually under such a scenario. “We have to treat it like it’s private property and the taxpayer has to be reimbursed on the market basis,” says Bennett Sandlin, the municipal league’s executive director. 

Nearly 40 local governments in Texas are participating in the lawsuit against the state, arguing that the law violates the state constitution. The suit largely hinges on a provision in the constitution prohibiting the legislature from authorizing localities to grant public money or a “thing of value” to corporations. The cities say that a fee limitation of $250 per pole essentially represents a gift. In the past, the Texas Supreme Court has upheld laws if their "predominant purpose" is to accomplish a public purpose and provide localities a return benefit. Most other states do not maintain a “thing of value” prohibition.

The FCC proposal, modeled after laws in Texas and other states, calls for all recurring fees not to exceed $270 per small cell. Localities could levy higher fees, but would need to show they represented “reasonable approximation” of maintenance and other costs incurred. Fees also must be nondiscriminatory, in that one company can’t be required to pay more for similar uses than another. 

Levin, who advises nonprofits and tech companies, thinks cities shouldn’t charge more than their cost burden, but also says local officials are in the best position to evaluate what those costs are. Cities incur construction management and permitting expenses for the installation of network nodes, along with potential liability expenses. Degradation costs result if mounted small cells lower the lifespan of infrastructure. Then there are opportunity costs representing what a pole might otherwise be used for. It’s likely to become more relevant once smart sensors, public safety gunshot locators and other technologies command more real estate. 

Cities have further expressed concerns over the way state laws pare their ability to regulate where and how small cells are installed. Wilton Manors, Fla., Mayor Gary Resnick, who testified before a U.S. Senate committee earlier this year, points out that individual localities possess their own unique construction challenges, such as Florida’s islands and coastal areas. “By preempting, you take away the ability to work through some of these issues with the carriers,” he says. “The ability to come to a win-win [scenario] is becoming harder and harder.”

Some localities prone to severe storms, for instance, require that utility lines be buried. For cities, one of the more concerning provisions of the FCC proposal is that it considers such a mandate an effective prohibition of wireless service if required of all installations, a violation of the order.

There’s a lot of prep work cities need to do before considering applications from 5G providers. Lincoln, Neb., has entered into agreements with multiple providers wanting to mount antennas and other equipment on public infrastructure. So they’ve introduced an electronic permitting system enabling multiple departments to review applications simultaneously. Staff must also draft local rules. The Tampa City Council, for example, approved a 120-day moratorium on new small-cell applications last year in order to do so, prompting a lawsuit from the wireless industry trade group CTIA.

To speed up deployment, the FCC order sets time limits for cities to process small-cell permit applications: 60 days for those where other equipment is affixed to existing poles and 90 days for new construction. Observers are concerned that cities might not be able to handle the workload if they’re flooded with hundreds of applications at once. The FCC guidelines allows for batch permitting if proposed installations meet certain criteria, meaning cities might need to review several hundred applications within the 60-day window. Seattle reports it increased staffing in several departments to review requests.

Network installations pose technical hurdles as well. Some poles are unable to handle the extra weight and electricity of a network node, says David Young, Lincoln’s right-of-way manager. Additionally, the proliferation of small cells has prompted worries over potential health risks, particularly given how close some pole-mounted antennas are to homes. The FCC last updated its radiation exposure guidelines more than two decades ago, based mostly on existing cellphone towers. Citizens in several communities have protested installations, and the agency is in the process of updating its standards.

One of the most common complaints from residents and officials concerns the aesthetics of small cells, which sometimes take the form of unsightly large boxes and wires hanging from poles. Crown Castle, a wireless infrastructure provider, has worked with several jurisdictions on designing small cells to blend in with the individual neighborhoods, such as white decorative light poles constructed along a boardwalk in Ocean City, Md. Crown Castle’s Richard Rothrock says many of the most successful deployments have occurred when the company has been left to work with city staff.  


One of the most common complaints concerns the aesthetics of 5G small cells.

Several local governments have already reached agreements with telecom providers to achieve various policy objectives, but their fate may now depend on the FCC order. When wireless providers approached the city of San Jose, Calif., about deploying 5G nodes, officials made improved access to areas with low internet participation a precondition for reducing fees. The eventual agreement, announced this summer, set tiered costs per network node installation, with lower fees for companies deploying more nodes. Along with this incentive, three companies pledged to contribute a total of $24 million over the next decade to a digital inclusion fund. The agreement is proof, says San Jose Mayor Sam Liccardo, that cities can work with the industry to bridge the digital divide.

San Jose’s agreement, covering what is thought to be the largest small-cell deployment so far, has been widely cited as a model by government associations. The wireless industry, though, feels otherwise. “It would … be a mistake to take such an arrangement -- negotiated by a locality with significant leverage and particular unrelated needs and challenges -- and treat it as a model nationwide,” Verizon’s Will Johnson wrote on the company’s website.

But it might not matter, as the FCC order includes no carve-out exempting any existing local agreements. FCC officials did not address multiple requests for comment on whether the proposal was intended to preempt agreements that local governments already have in place. The order is based largely on recommendations developed by the FCC’s Broadband Deployment Advisory Committee last year and earlier this year. State, local and tribal officials made up only four of 25 members of a committee on state and local regulatory barriers. One of those members, San Jose’s Liccardo, says it quickly became apparent that the industry was dominating the outcome, and he resigned his position in January. “What we’re seeing through the FCC, Congress and many state legislatures,” Liccardo says, “is a willingness of those public officials who have been co-opted by private industry to impose on local taxpayers the obligation to subsidize big telecom.”

FCC Chairman Ajit Pai has repeatedly hinted that state and local authority over small cells would be scaled back. “The more difficult government makes it for companies to build a business case for deployment, the less likely it is that broadband providers -- big and small -- will invest the billions of dollars that are necessary to connect consumers with digital opportunity,” he said in a speech last year.  

If the FCC order is approved, industry observers anticipate litigation will follow. A Senate bill, the STREAMLINE Small Cell Deployment Act, outlines similar rules for states and localities. The legislation, while unlikely to pass this year, already has attracted some bipartisan support.

Mike Maciag is Data Editor for GOVERNING.
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