TR Daily Pai Announces Plan to Create Rural Digital Opportunity Fund
Friday, April 12, 2019

Pai Announces Plan to Create Rural Digital Opportunity Fund

FCC Chairman Ajit Pai today announced his intent to ask his fellow Commissioners to establish the Rural Digital Opportunity Fund to inject $20.4 billion into broadband networks in rural areas over the next decade to extend broadband services to up to four million homes and small businesses. The plan immediately drew questions from his Democratic colleagues and some others, although it was praised by a number of industry entities and their allies.

Mr. Pai also announced today that he plans to start the FCC’s third auction of millimeter-wave band spectrum – which will include licenses for the 37 gigahertz, 39 GHz, and 47 GHz bands – on Dec. 10. The FCC today adopted a public notice seeking comments on procedures for an incentive auction of the spectrum (see separate story).

Mr. Pai appeared at the White House this afternoon with President Trump to stress the importance of the U.S. leading the world in 5G deployment, and Mr. Trump emphasized the role of private, not government, investment.

The Rural Digital Opportunity Fund would use monies repurposed from the Connect America Fund, whose term of support ends next year with a phase-out in 2021, Mr. Pai told reporters during a conference call this morning. There would be no impact on other universal service funds, nor on a proposal to set an overall cap on Universal Service Fund programs, Mr. Pai said.

Mr. Pai said he wants the FCC to launch a proceeding later this year to establish the new fund, but he was not more specific on timing. “We want to get this program stood up as soon as we can,” he said.

He said he would like the new fund to use a reverse auction, noting the FCC’s successful CAF-II auction. He also said he wants funds to be available to rural communities that don’t have the FCC’s 25 megabits per second downstream and 3 Mbps upstream (25/3) standard. He also said that while the funding could be used for 5G, he wants the program to be technology neutral, noting that a number of non-traditional entities participated in the CAF-II auction, including satellite companies, wireless carriers, and electric utilities, producing intermodal competition. That competition helped drive prices down so that some targeted areas could be covered for $1.5 billion in subsidies rather than the earlier estimated $5 billion, the Chairman said.

“This is a critical tool toward closing the digital divide, and it will provide some of the infrastructure to connecting rural Americans with 5G technologies,” Mr. Pai said of the new planned fund.

He also cited the potential of using fixed wireless technology to deliver 5G services in rural areas, saying, “I’m very bullish on the capability of 5G in rural areas.”

Mr. Pai also stressed that the millimeter-wave band auction scheduled to begin Dec. 10 will be the largest ever held by the U.S., offering 3,400 megahertz of spectrum in three different bands at one time.

He was asked about proposals for the U.S. government to nationalize 5G networks or at least to build its own nationwide wholesale system.

“I’ve been very consistent, in my view, that the markets, not government, is best positioned to drive innovation and investment in the wireless field,” Mr. Pai replied.

As for the FCC’s pending supply chain proceeding, the Chairman said, “We continue work with our federal partners on finalizing that proposal.”

As to concerns about the health risks of 5G networks, Mr. Pai said, “This is an issue that we take seriously.” He added that the networks will rely on small cells that use less power than 4G towers and noted that the FCC consults with the Food and Drug Administration on health issues. “We are confident that the FCC’s limits … will be safe,” he said.

During this afternoon’s White House event, Mr. Pai said that the U.S. “is now well-positioned to win the race to fast, secure, and reliable 5G.” He cited actions that the FCC has taken, including freeing up spectrum and streamlining the deployment of small cells.

“We cannot allow any other country to out-compete the United States in this powerful industry of the future,” Mr. Trump said. “We are leading by so much in so many different industries of that type, and we just can't let that happen. The race to 5G is a race America must win, and it's a race, frankly, that our great companies are now involved in. We've given them the incentive they need. It's a race that we will win.

“In the United States, our approach is private-sector driven and private-sector led. The government doesn't have to spend lots of money,” Mr. Trump added. “According to some estimates, the wireless industry plans to invest $275 billion in 5G networks, creating 3 million American jobs quickly -- very quickly -- and adding $500 billion to our economy. And, as you probably heard, we had another alternative of doing it; that would be through government investment. And leading through the government, we don't want to do that because it won't be nearly as good, nearly as fast. And especially in that business, I think that they'll be better doing the job than a lot of the folks who we know and love.”

Mr. Trump also said that “[t]o accelerate and incentivize these investments, my administration is focused on freeing up as much wireless spectrum as needed – we’re going to free it up so they'll be able to get out there and get it done – and removing regulatory barriers to the build-out of networks.”

He noted that the administration is preparing a national spectrum strategy.

The president also praised the FCC for working to streamline the siting of 5G infrastructure, including by imposing shot clocks and “a cap on the unreasonable fees local governments often charge. They get greedy.”

“But we must not rest; the race is far from over. American companies must lead the world in cellular technology. 5G networks must be secure. They must be strong. They have to be guarded from the enemy – we do have enemies out there – and they will be. They must cover every community, and they must be deployed as soon as possible,” the president added. “As we are making great progress with 5G, we're also focused on rural communities that do not have access to broadband at all. … We're working closely with federal agencies to get networks built in rural America faster and at much, much lower cost than it is even today.”

A 5G fact sheet released by the White House seemed to take credit for FCC actions to spur 5G deployment.

“The United States is working internationally on telecommunication security principles that will foster reliable 5G network and supply chain development,” the fact sheet also said.

The issue of whether 5G networks should be nationalized has been hotly debated.

Early last year, FCC Commissioners, members of Congress from both parties, industry players and their allies, public interest advocates, and others blasted a Trump administration proposal for the U.S. government to build a nationwide 5G network that is secure against hackers and ensures that the U.S. effectively competes against China in the Internet of things ecosystem (TR Daily, Jan. 29, 2018). The proposal was included in slides and a memo leaked to the news media.

More recently, Kayleigh McEnany, national press secretary for Mr. Trump’s 2020 campaign, touted the benefit of a national wholesale 5G network (TR Daily, March 4). Trump campaign manager Brad Parscale has often expressed support in tweets for a nationwide wholesale 5G network.

In his remarks today, Mr. Trump did not mention what had been an expected Trump executive order that could lead to a ban on the sale by Chinese vendors of telecom equipment for U.S. commercial wireless networks (TR Daily, Feb. 8). The executive order would tee up a rulemaking that would decide which vendors would be banned from selling their equipment to U.S. wireless carriers, an industry source has told TR Daily.

Democratic Commissioners raised questions about today’s announcements by Mr. Pai and the event with Mr. Trump.

“So far, this Administration’s interventions on 5G have done more harm than good,” Commissioner Jessica Rosenworcel said in a statement. “From imposing tariffs on 5G equipment to alienating allies on 5G security to falling behind the rest of the world on critical mid-band spectrum, the White House has yet to offer a workable plan for US leadership. On top of that, allies of this Administration are muddling our efforts with persistent talk of a nationalized 5G network. I hope today’s announcement offers better because our global leadership is at stake.”

As for the planned new rural broadband program, Ms. Rosenworcel told reporters after today’s FCC meeting, “It looks to me like they are dressing up an old program in new Trump-era clothes. It doesn’t look like any new funding but instead, same old, same old -- an extension of the Connect America II fund, with a press release to accompany it. I hope we will learn more information later. I think the better course would be to share this information with your colleagues before announcing it from the White House.”

“I am extremely interested in the details, going forward,” Commissioner Geoffrey Starks said. “The other thing I would say is, this idea has previously been kicked around. I know there was a high degree of matching that was going to be called for from the states. I’ll be interested to see if that is part of this as well.”

“It does seem to smell like something that is repackaging some of the money we already have, because coming up with $20 billion from the FCC is not something that you just trip over,” Mr. Starks also said. “We will be very interested to make sure exactly where this money is coming.”

“I look forward to learning more about it when the Chairman actually makes an official announcement,” Commissioner Mike O’Rielly said. “I do think the work we’ve done since the initial [CAF] round went out has been incredibly helpful. … One of my former staffers spent many years to help introduce reverse auctions to our USF program, so I would like to believe and I think the Chairman is — not only did we do it in CAF Phase II, I think we’ll carry it through. I worked really hard to make sure technology neutrality was included, and different technologies would be part of the equation, as opposed to when the money first went around, where it was the right-of-first-refusal of the incumbent provider, … which when I first came to the Commission I thought it was a terrible idea, but it was something I couldn’t change.”

He said he would like to see a reverse auction and technology neutrality in the new program announced today, and that he was hopeful they would be, given the Chairman’s support for those approaches in the past.

Commissioner Brendan Carr said, “I do think it fits in as I said with this broader plan that we’ve been executing for the past few years to get 5G deployed whether it’s the spectrum side or the infrastructure side. … I think this new announcement of the Chairman will fit in really well with that.”

Mr. Pai’s announcements and the White House event generally drew praise from industry entities and their allies, as well as others.

“We’re not Venezuela. We do not need a big government role over the networks; we need massive private investment working with the federal government to win the race to 5G. I applaud President Trump and Chairman Pai’s commitment to this approach,” said Rep. Greg Walden (R., Ore.), ranking member of the House Energy and Commerce Committee. “5G is the future and America must lead. Likewise, to truly win this race, all Americans must be included. The $20.4 billion over 10 years to rural broadband – titled the 'Rural Digital Opportunity Fund' – is an unprecedented assurance to every community that you will be part of this next wave of wireless connectivity.”

“Today’s statement by the President puts an end — once and for all — to any misguided notions of nationalizing spectrum resources or government-mandated wholesale 5G markets,” CTIA President and Chief Executive Officer Meredith Attwell Baker said. “The White House’s continued commitment to the free-market principles that have made the U.S. the global leader in wireless recognizes this industry’s remarkable track record of investing in our nation’s connectivity infrastructure—$226 billion in the last nine years alone. We thank the President and Chairman Pai for their leadership. We agree with the Administration and the FCC that bringing next-generation wireless networks to more Americans is critical and that quickly freeing up more spectrum — particularly mid- and high-band spectrum — will help ensure our continued 5G global leadership.”

“CCA thanks the Administration for its focus on deploying 5G throughout the US and particularly for including rural areas in its plan,” said Competitive Carriers Association President and CEO Steve Berry. “Auctioning additional spectrum and providing certainty regarding deployment policies will support industry efforts to bring the latest wireless services to urban and rural areas alike. Revolutionary services and technologies depend on robust wireless connectivity, and it’s critically important to ensure Americans in all corners of the country have access to these services.”

“WISPA hails the intensified focus on bettering rural connectivity, which will help country farmers receive the same evolving level of broadband services and connectivity as city financiers. We encourage the Administration and the FCC to consider how spectrum policy that enables small, rural providers to offer better services will make this investment even more cost-effective,” said Claude Aiken, president and CEO of the Wireless Internet Service Providers Association.

“Today’s announcement of the Rural Digital Opportunity Fund represents a potentially significant leap forward in our nation’s efforts to overcome the digital divide. First and foremost, NTCA is delighted to see recognition from policymakers at the very highest levels of the inextricably integrated nature of communications networks — put another way, that wireless needs wires and 5G needs fiber,” said NTCA CEO Shirley Bloomfield.

But Public Knowledge urged Congress to closely scrutinize the new planned fund.

“Today’s announcement raises many questions. Most importantly, where will this money come from and over how many years? Is the Administration promising to provide new money for rural broadband through existing authority, or is the Administration going to need to ask Congress to provide new money? How will this differ from the Connect America Fund?” asked Public Knowledge Senior Vice President Harold Feld. “While updating these programs may prove helpful, they will not do much to change the unfortunate state of rural broadband in the short-term or do much to accelerate 5G deployment without real reform to directly address new deployment. For this reason, we urge Congress to press Chairman Pai for further details, and to work on new funding for rural broadband in accordance with the principles developed by the Broadband Connects America Coalition.”- Paul Kirby, [email protected]; Tom Leithauser, [email protected]; Lynn Stanton, [email protected]

MainStory: FCC FederalNews SpectrumAllocation BroadbandDeployment

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