TR Daily Levin Blasts Draft FCC Small Cell Item
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Wednesday, September 19, 2018

Levin Blasts Draft FCC Small Cell Item

Former FCC Chief of Staff Blair Levin has blasted a draft declaratory ruling and third report and order that the FCC plans to consider at its Sept. 26 meeting (see separate story) to facilitate the deployment of small cells, saying the item amounts to a “power grab” by the FCC. Meanwhile, some localities say they are worried that the item will undue agreements they have reached with providers.

The draft item would bar localities from adopting rules that prohibit the deployment of wireless infrastructure, impose limits on the fees that municipalities can charge for reviewing small cell deployments, and set shot clocks for acting on small cell applications. However, it would not adopt a “deemed granted” remedy sought by the wireless industry but opposed by localities. The item has drawn criticism from scores of localities and groups representing them.

The Coalition for Local Internet Choice, on whose board Mr. Levin sits, submitted a letter from Mr. Levin on the draft item to the FCC yesterday in WT docket 17-79 and WC docket 17-84.

Mr. Levin is a nonresident senior fellow in the Brookings Institution’s Metropolitan Policy Program, but he said he wrote the letter at the request of the coalition and the National Association of Telecommunications Officers and Advisors “in my personal capacity” and that the views should not be attributed to any organization with which he is affiliated.

“First, focusing on state and local government fees and processes is a distraction from the real obstacles to accelerated and ubiquitous deployment of next generation mobile services, which are that broadband deployment economics are very challenging and have to be addressed at all levels of government and through creative collaboration with the private sector,” Mr. Levin said. “Fees for access to public property represent only one of many, many costs of doing business a carrier will encounter. A focus on reducing or eliminating one (relatively marginal) cost of doing business does not solve the challenging economics of broadband deployment and serves only to obscure the true challenges. Indeed, even if one accepts the FCC claim about the $2.5 billion — which is highly questionable — that amount is about 1% of what the FCC and industry claim is the necessary new investment needed for next generation network deployments, and therefore is not likely to have a significant impact.”

“Second, local governments have a strong recent track record of endeavoring to enable and facilitate broadband deployment, as the Google Fiber experience conclusively demonstrated,” Mr. Levin added. “Vilifying them based on fees for use of public property is not only a distraction, but also unfair. Indeed, rather than acknowledging that carriers have a proven ability to negotiate advantageous fees with localities, the FCC’s draft order infantilizes carriers by preempting state and local government, presumably on the theory that carriers cannot protect themselves in negotiations with states and localities.

“This is absurd. As the carriers themselves have acknowledged, they have sufficient leverage to walk away from any locality that creates too many obstacles to deployment and that leverage has led them to strike the same kinds of deals that numerous fixed broadband providers were able to strike in the wake of the Google Fiber efforts. In the attached speeches, I note the piece de resistance demonstrating the ability of carriers to work things out with localities without federal interference involves the carriers and the city of San Jose. They were antagonists in the FCC’s recent BDAC process, but those parties were able to negotiate terms that all thought fair and that allows the companies to begin small cell deployments. Notably, the deals include having the companies contribute to a digital inclusion initiative and help the city pay for accelerated permitting, thus securing all parties’ goals. Further, San Jose is not unique. Other cities and carriers have struck deals that provide benefits to both sides and will result in deployment without the need of a top-down, one-size-fits-all framework that the FCC is preparing to impose on thousands of diverse municipalities.”

Mr. Levin continued, “The FCC characterizes its draft order as ‘balanced,’ which is equally absurd, as all the new costs and obligations are borne by localities and all the benefits are enjoyed by the carriers. The more accurate description would be a ‘power grab’ in which the FCC majority substitutes their judgment of what is best for local communities for the judgment of duly elected local officials.”

“Third, the FCC’s draft order is based on a fallacy that no credible investor would adopt and no credible economist endorse: that reducing or eliminating costs for small cell mounting on public property in lucrative areas of the country (thus reducing carriers’ operating costs), will lead to increased capital expenditures in less lucrative areas – thus supposedly making investment more attractive in rural areas,” Mr. Levin said. “That simply is not how investment decisions are made. Rather, as Commissioner [Brendan] Carr admitted in his recent speech, in lucrative areas, carriers will pay market fees for access to property just as they would any other cost of doing business. But they will not, as rational economic actors, necessarily apply new profits (created by FCC preemption) to deploy in otherwise-unattractive areas. My experience on Wall Street is that neither analysts nor investors regard this FCC action as likely to lead to increased deployment in non-economically attractive areas, which most on Wall Street would consider an irrational act. The smoking gun revealing that neither the companies nor Wall Street believe the economic logic that the FCC uses is that, to my knowledge, no carrier has publicly specified and committed to Wall Street that the FCC action will cause it to materially increase its capital expenditures or has specifically committed to how its deployment map will be broadened in light of the FCC action.”

“Finally, let me note something I discuss at length in the attached speeches: the draft order presents a framework in which industry gets all the benefits (reduced fees to access state and local property) with no obligations to reinvest the resulting profits in rural broadband — even though the purported rationale for the reduced fees is that they will lead to new investment,” Mr. Levin argued. “At the same time, states and localities will be forced by federal mandate to bear all the costs and receive no guaranteed benefits. These costs include not just the loss of revenue but having to bear the increased costs of addressing the permitting needs of a single industry (which, notably in the case of deals negotiated between carriers and cities, carriers agreed that they should assist in funding some of those costs.) The principal impact of the FCC’s action is to facilitate a large transfer of wealth from the public to private enterprises — and leave American communities and states no better positioned to bridge digital gaps between urban and rural or between rich and poor.”

Meanwhile, dozens of localities continued to submit filings with the FCC criticizing the draft item. Many of the localities are using similar language in expressing their concerns about the proposed new shot clock deadlines, the definition of “effective prohibition,” and the proposed structure for recurring fees.

“The FCC’s proposed new collocation shot clock category is too extreme,” the League of California Cities said in one of many similar filings. “The proposal designates any preexisting structure, regardless of its design or suitability for attaching wireless equipment, as eligible for this new expedited 60-day shot clock. When paired with the FCC’s previous decision exempting small wireless facilities from federal historic and environmental review, this places an unreasonable burden on local governments to prevent historic preservation, environmental, or safety harms to the community. The addition of up to three cubic feet of antenna and 28 cubic feet of additional equipment to a structure not originally designed to carry equipment as large as a refrigerator necessitates more review than the FCC has allowed in its proposal.”

“The FCC’s proposed definition of ‘effective prohibition’ is overly broad,” the league continued. “The draft report and order proposes a definition of “effective prohibition” that invites challenges to long-standing local rights of way requirements unless they meet a subjective and unclear set of guidelines. While the Commission may have intended to preserve local review, this framing and definition of effective prohibition opens local governments to more conflict and litigation over requirements for aesthetics, spacing, and undergrounding.”

“The FCC’s proposed recurring fee structure is an unreasonable overreach that will harm local policy innovation,” the filing added. “We disagree with the FCC’s interpretation of ‘fair and reasonable compensation’ as meaning approximately $270 per small cell site. Local governments share the federal government’s goal of ensuring affordable broadband access for every American, regardless of their income level or address. That is why many cities have worked to negotiate fair deals with wireless providers, which may exceed that number or provide additional benefits to the community. Additionally, the Commission has moved away from rate regulation in recent years.”

In another filing, the Ohio Municipal League said that “Ohio’s municipalities are deeply concerned about the substantial loss of local control they would experience if this proposal is approved. Local governments are responsible for protecting the health, safety and welfare of residents, and we believe they have the right to set parameters regarding the impact to the local aesthetics in their municipal rights-of-way. Furthermore, we believe the proposal would expose wireless infrastructure providers to unnecessary liability.

“The Ohio Municipal League, along with many municipal leaders across the state, worked tirelessly with representatives from the telecommunications industry to craft an agreed-upon compromise between the telecom industry and municipalities. This compromise ensures the deployment of small cell wireless infrastructure throughout the state, meeting many of the needs of the telecommunications industry while allowing local governments to provide for the health, welfare and safety of their communities,” the filing added. “These guidelines became Ohio law earlier this year via House Bill 478. This proposal would undo countless hours of negotiations and have the effect of compromising the important consensus both parties reached.”

San Jose, Calif., Mayor Sam Liccardo complained that the draft item would not honor existing agreements between localities and providers, such as an agreement that his city has signed with several companies.

“The express ability of parties to freely negotiate and honor the terms of existing arms-length agreements is fundamental to a fair legal system providing a predictable, efficient, and mature marketplace. The City of San José has successfully reached freely negotiated small cell deployment agreements with AT&T, Verizon, and Mobilitie,” he said. “These successful agreements are a balance of maximizing mutual interests toward a shared goal: accelerating broadband deployment in the City of San José. In good faith, these agreements commit the City to 30- and 60-day permit timelines, outperforming the FCC’s shot clock in most cases. That is possible because the agreements provide for required funding through permit and usage fees, thereby allowing investment in process improvements, staffing, and technology. The City of San José is working with carriers on a non-discriminatory basis as partners in reaching our 5G future. The fee structure also incents large-scale deployments by reducing the usage fee for a commitment to install a greater number of small cell nodes, thereby creating a more robust network and competitive marketplace for San José residents because a clear public benefit of a larger network is provided to obtain the lower usage fee. Similarly, mobile carriers recognize the role of the permit process to protect public safety by ensuring the small cells are verified to comply with building, electrical, and safety codes while integrating with the built environment’s design.

“Under the rubric of preempting pre-existing agreements because the mutually agreed upon fees are interpreted after the fact to ‘prohibit or have the effect of prohibiting the provision of service,’ the FCC uses a novel interpretation of Section 253(a) and Section 332(c)(7)(B),” Mayor Liccardo added. “But invalidating existing agreements that include freely negotiated, non-discriminatory fees threatens local governments’ ability to enter into agreements with willing parties in good faith. We urge the FCC to reconsider the preemptory interpretation in order to protect this fundamental legal tenet of conducting business across all levels of government and grandfather existing agreements[.]”

Los Angeles Mayor Eric Garcetti said that he and his staff “have worked diligently over the past 14 months to develop comprehensive small cell and upgraded equipment deployment agreements, which are in the process of being fully executed and operational by two of the nation’s largest national carriers: Verizon and AT&T. These agreements, will not only bring 5G services to Los Angeles starting on October 1, 2018, but will also cooperatively leverage our city’s assets to enable deployment of 5G by companies while also closing the digital divide. The rent we agreed to provides for a reduced monetary fee and a cooperative deployment of smart city and digital inclusion technology and services.

“The proposed Carr Order would jeopardize all these benefits,” the mayor said. “It will insert confusion into the market, and sow mistrust between my technology team and the carriers with whom we have already reached agreements. The Commission, while staying true to its commitment to promote 5G deployment, could avoid marketplace confusion by simply grandfathering in any proposal or formal agreement entered into prior to the effective date of the order. Alternatively, the Commission can stay the adoption of such an order until the Commission has allowed for a one-year period or sufficient time to permit local authorities to enter into such agreements with the telecommunications industry, as we have done and will continue to do with the other carriers at the City of Los Angeles.”

The mayor added, “The agreements that my team and I have negotiated reveal that our pricing scheme is not prohibitory, and the beneficiaries of the deals are the residents of the City – rather than suffering from a digital divide we are able to leverage public assets to bring smart city solutions to all the neighborhoods of Los Angeles.”

The National Association of Regulatory Utility Commissioner also registered its concerns with the draft item.

“The FCC should respect clear limits on its authority set by Congress,” NARUC said. “The texts of 47 U.S.C. §§ 253, 332, and 224 are clear and unambiguous. None support broad FCC preemptive power vis-à-vis pole rights-of-way or city owned structures. The FCC’s legal analysis is deficient insofar as it appears to fail to specify that the services at issue are telecommunications services that both provisions target.”

“The Draft adopts an overbroad reading of Section 253(a),” NARUC added. “In ¶ 51, the Draft finds that a state or local legal requirement would violate Section 253(a) if it ‘materially limits or inhibits’ an entity’s ability to compete in a ‘balanced’ legal environment for a covered service. The FCC is effectively suggesting that reading the word ‘prohibit’ to mean ‘literally prohibit’ – and the phrase ‘have the effect of prohibiting’ to mean an ‘effective prohibition’ – cannot possibly be what Congress intended.”

NARUC also said that the draft item “takes a view of § 253(c)’s ‘compensation’ that is inconsistent with the uses of the both the words ‘compensation’ and ‘cost’ throughout the rest of Title 47. Congress knows how to specify reasonable recovery of ‘costs.’ And it seems illogical on its face that Congress would describe a ‘fair and reasonable’ compensation, if what they really meant was, as the Draft suggests, a reasonable recovery of costs. Also, it appears from the structure of § 253, that the FCC does not have § 253(d) authority to act via a general rule on § 253(c)’s compensation provision.

“Pursuing distorted constructions of clear statutory text is a bad idea,” NARUC added. “In this docket, imposing a complex top-down regulatory regime found nowhere in the statute will require significant distortions. Indeed, the FCC’s past successes with strained and sometime contradictory readings of its statutory authority have done nothing but provide useful legal precedent for future FCC’s that 1996 Act does not place serious limits on the agency’s authority to either deregulate or regulate. Every time any agency successfully expands its authority beyond the plain text of the statute, it necessarily results in less long term certainty for the legal rules and regulations that will be applied by a future FCC. Each successful expansion necessarily increases the FCC’s ability to act in the future in areas and in ways that Congress never intended.”

Meanwhile, Pennsylvanians Against Smart Meters also expressed concern about the item and asked the FCC to postpone action on it and seek further comment.

“We need to be protecting our children’s health, reducing threats to it. Small wireless cell facilities are expected to cause eye, skin and testicular problems. We already have an increased risk of creating cancer, brain and reproductive problems associated with the current wireless technologies,” the group said. “We need to be protecting our nation’s children, acting with precaution by keeping our homes a low EMF environment. This ruling will do the opposite and prevent us from properly caring for our children.”

The group added, “Our members value their privacy. This technology will violate that as wireless data will be collected by an increasing number of items in the Internet of Things. We do not consent to the collection of our personal data, and object to our personal data being sold. Wireless technology is not as secure as wired. We prefer hardwired, fiber optic systems because they are safe and secure.”

“The FCC is mandated to protect American citizens from the known hazards of microwave radiation exposure. Nowhere is it stated that the FCC’s function is to facilitate deployment of infrastructure for the sole purpose of enhancing the telecom industry’s profit-making potential,” said Consumers for Safe Cell Phones. “This proceeding is an egregious ploy to circumvent the democratic process; clearly this level of law-making is to be undertaken by Congress as representatives of the people – not by a federal agency that has become aligned with the industry it is mandated to regulate.”

The group urged “the FCC to place a hold on all 5G deployment until the obsolete and inadequate health/safety exposure guidelines can be reassessed to ensure that the public is protected from this carcinogenic exposure.”

But CTIA and other industry entities and their allies have reiterated their support for the FCC’s action at its Sept. 26 meeting.

“In short, the record evidence is clear: outdated, burdensome regulation, wholly inappropriate for small cells, is deterring investment in new infrastructure and slowing deployment of next-generation connectivity to both urban and rural areas across the country,” CTIA said. “The Draft Order and Ruling, which is well within the Commission’s legal authority and amply supported by an extensive factual record, will have a material impact on the economics of broadband deployment, driving expanded and more robust wireless connectivity that will benefit the U.S. in multiple ways. CTIA thus urges the Commission to adopt the Draft Order and Ruling.”

“While providers continue to negotiate with states and localities to reach agreements to deploy next-generation technologies, further reforms are necessary to secure the United States’ position as a leader in 5G development,” Competitive Carriers Association President and Chief Executive Officer Steve Berry said in a news release today on an ex parte filing made by his group. “CCA members often face burdensome, unreasonable, and unpredictable siting obstacles at the state and local levels. To provide affordable, next-generation technologies and 5G services to consumers, it is vital that the FCC adopt the proposals described in the draft Declaratory Ruling and Third Report and Order. What’s more, the Commission should seize the opportunity to build upon its smart policies by extending the proposed injunctive relief available at the expiration of a small cell shot clock to all types of deployments. Indeed, next-generation and 5G deployments will require a variety of network infrastructure to support advanced services, and these deployments often are designed around existing macro towers and facilities to increase overall network efficiency and resiliency. For these reasons, the Commission should extend the remedy for expired shot clocks to deployments related to small wireless facilities and macro cells.”

Mr. Berry continued, “Additionally, the Commission should further address requirements for the spacing of wireless installations as certain standards continue to impede next-generation deployments, particularly when seeking to deploy on existing equipment. Together, these important reforms will advance America’s position in the global race to 5G for the benefit of consumers in all areas of the country and the economy.”

Also, Starry, Inc., endorsed a request by the Wireless Internet Service Providers Association asking the FCC to modernize “the Over-the-Air Reception Devices (‘OTARD’) rule to apply to all fixed wireless transmitters and receivers, so long as the equipment meets the existing size restrictions for customer-end equipment. Starry echoed the comments filed by The Wireless Internet Service Providers Association (‘WISPA’) that a simple and transparent modification to OTARD would have meaningful impact in accelerating the deployment of competitive broadband services across the country – while still maintaining existing size limits and exceptions for safety and historical purposes. Modernizing OTARD would empower consumers to bring competitive wireless broadband to their communities and neighborhoods, without adding new regulatory burdens on local municipalities. Starry suggested that the Commission could propose this rule change in its next decision in the above captioned docket.”- Paul Kirby, [email protected]

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