Communications Companies Making Big Network Investments, Need Certainty, NARUC Told

More than half of U.S. households have “cut the cord” and have only wireless phones, Bergmann said. Fifth-generation networks will allow applications not possible under 4G and a massive IoT, he said. “A big part of our 5G networks will be small cells,” Bergmann said. “It’s important we’re able to move more quickly and we have infrastructure policies designed for that speed.” Carriers “are rushing to be first” on 5G, he said.

After the FCC imposed Title II rules on ISPs in 2015, ISP investments fell $2 billion per year, Banks said. “That is a concern for us,” Banks said. “Any decline in broadband investment is deeply troubling.” Investments in broadband in Europe, with its heavier regulation, is about half per person of what's invested in the U.S., Banks said. The FCC overturned those rules in December.

The Clinton presidency made a "bet" that if you don’t regulate the internet heavily, “you’re going to encourage a lot more investment” and that’s what happened, said Rick Chessen, NCTA chief legal officer. “Businesses hate uncertainty.” Chessen said there won’t be real certainty unless Congress addresses net neutrality rules, and “the time is right” for Congress to act. Banks and Chessen said it's difficult to say with precision exactly how or why investment fell after the 2015 net neutrality rules.

“What your industries all do is very helpful,” said Colorado Public Utilities Commissioner Wendy Moser. When industry discusses its success in reaching more of America, it’s usually talking about urban America, she said. “One of the main concerns of regulators … is how do we get broadband to everybody so that you don’t create a rural/urban digital divide.” Is it time to re-regulate industry in rural areas? she asked. As rural America was electrified, “we created monopoly territories so that service can be had by all,” she said.

“As an industry, we’re investing billions,” Banks responded. “We’re not necessarily making billions.” Some wireline carriers are in a tough situation because of the decline in voice customers and their market position in broadband. “Urban areas are extremely competitive now,” Banks said. “There’s no way to reinstate the old approach, which used to be you make money in urban areas and spend it in rural.” Industry worked with the FCC to make sure USF is better targeted, Banks said. “That program is far better than it was in terms of using geocoding location, using cost modeling to try to funnel money to rural areas, where there really is no way to provide service without support.”

Some 93 percent of U.S. homes have access to cable broadband, Chessen said. “We’re talking about a 7 percent issue, but we still recognize that that is an important 7 percent to try to address.” USF programs have really targeted subsidies to underserved areas for only five or six years, he noted.

Nebraska Public Service Commissioner Tim Schram asked if access to one broadband provider is enough or whether all consumers should have a choice. “From the perspective of the wireless industry, we want to serve every customer,” Bergmann said. LTE reaches 98 percent of the U.S. public, he said. But rural areas are challenging to serve, he said. “They’re more costly,” he said. “Their population is more sparse. Geography is difficult. It takes extra work.”

“We will get there, especially with 5G,” Chessen said of competition everywhere.

In big chunks of America, networks require USF support to get built and the FCC decided it can pay for only one fixed network in a given area through the USF, Banks said. “That’s the policy choice,” he said. “The FCC doesn’t have the budget to pay for a second network.”

Mosher warned that local governments will have trouble approving the expected onslaught of applications for building small cells, especially if they must act in a tight timeframe. “Reasonable” deadlines for local government decisions are key to 5G, Bergmann said. The infrastructure is changing and the time it took to approve a 200-foot macro tower shouldn’t be required for a small cell the size of a “pizza box,” he said. “Localities don’t have to say yes, they can say no, but we need answers quickly.”

NARUC Notebook

Analysts told NARUC net neutrality is likely to continue to cause uncertainty for the communications sector, even after the FCC overturned the 2015 rules in December. The threat of net neutrality has depressed ISPs' investment for 15 years, said Frank Louthan, analyst at Raymond James. “It has kept them from expanding networks.” Carriers never pursued all the investment that was open to them, he said. Repeal of the rules is likely to lead to lots of new investment and new products, Louthan said: “It gets that certainty back into the marketplace.” For investors, uncertainty is worse than bad rules, he said. “The door was open to rate regulation” as a result of Title II regulation of ISPs, said Wells Fargo’s Jennifer Fritzsche. That was a “big point of worry.” Companies need “line of sight” on what the regulations will be, she said.

Analysts saw lots of interest in 5G. Gregory Spencer of BlackRock Advisors predicted “an arms race” among the carriers on 5G with “very pronounced investments.” He warned much of the U.S. could be left out. “I don’t see companies talking about the smaller suburban areas and below,” he said. “What is 5G?” Fritzsche asked. “It depends on which carrier you’re talking to.” The biggest feature of 5G is low latency, she said. “That means that 5G will be rolled out first in the densest, most populous areas.” Louthan agreed 5G will be deployed first in cities. “I’m a little skeptical at how ubiquitous and how utopian 5G can be that quickly,” he said. “It can be in small pockets.” Carriers will need to deploy 5G in different bands, Louthan said. If it’s just offered in high-frequency spectrum, there will be coverage “holes,” he said. “You’ll have a product that can’t be sold or marketed very effectively.” Frizsche compared 5G to a golf bag. “You don’t need just a putter,” she said. “You’re going to need to multiple bands of spectrum.” Carriers don't now face a spectrum shortage, said Fritzsche.

Other NARUC news Monday: A draft backing Lifeline resellers advanced (see 1802120029) and regulators discussed the White House infrastructure spending plan (see 1802120001).