Observers weigh in on 5G nationalization

Feb. 2, 2018

Observers are weighing in on reported plans to significantly inject government into the rollout of 5G. Tim Wu in The New York Times writes, “No one can accuse the Trump administration of being boring, even when it comes to telecom.”

At Brookings, Tom Wheeler, who served as FCC chairman from 2013 to 2017, comments, “It is a breath-taking proposal from the King of the Deal’s White House!”

Wu, a law professor at Columbia and Times contributing opinion writer, sees pros and cons to building a national network. Done right, it “…could save Americans a lot of money and revive competition in what has become an entrenched oligopoly,” he explains. “Done wrong, it could look like something out of Hugo Chávez’s disastrous economic playbook.”

I think we can all agree with Wu that “Americans spend an extraordinary amount of money on bandwidth.” Our telecom bills collectively function like a private tax on the economy, he says. He posits a national 5G network that would be a 21st century Tennessee Valley Authority, with the government deploying towers across the country, prioritizing underserved areas, and selling bandwidth at cost, creating a new business model for small local resellers.

Such an approach, we writes, would create competition for Verizon, AT&T, T-Mobile, and Sprint as well as the cable companies that face minimal competition in most locations.

Wu advises against a Chávez-esque strongman approach of nationalizing AT&T’s and Verizon’s nascent networks. “Seizing private assets in peacetime without good reason sets a dangerous precedent,” he writes. “And you don’t need to be paranoid to fear the combination of the world’s largest government and the largest telecommunications companies.”

Wu also warns that while the government can be good at building things, it has a poor record of management. He suggests that any government-owned network be sold off to the highest bidder after a decade or so. A federal network may be the best way to get 5G to more citizen quickly, he concludes, adding that the concept merits serious attention.

Writes Wheeler at Brookings, “Even European governments that formerly owned their telecommunications networks have recognized that state ownership is a disincentive to efficiency and technological progress. The Australian government tried—and failed—to build a government-owned wholesale fiber network.”

He says the proposals immediate effect will be to raise uncertainty about 5G investment. “It is an amazing outcome, considering how the Trump FCC railed about how the Open Internet rules had chilled network investment,” he writes, referring to the FCC acting to end net neutrality.

Wheeler notes that the administration seems primarily concerned about cybersecurity. “When the outgoing Federal Communications Commission (FCC) cyber experts met with the Trump FCC and NSC transition teams, they expressly informed them that a FCC retreat from ongoing cybersecurity activities would have dire consequences for 5G and the future of the nation’s critical communications infrastructure,” he writes. “Nevertheless, the Trump administration ignored cyber concerns in the selection of the new chairman. Immediately upon taking office, the chairman rescinded the Obama FCC’s requirement that any new 5G technology must have built-in cybersecurity standards in order to operate in the United States.” The rescinded requirement would have made cybersecurity a priority rather than an afterthought.

“It is hard to believe in an era of $24 million Air Force One refrigerators that government procurement is the best way to build the next generation network,” writes Wheeler. “But the NSC staff have concluded that the cyber risk—exacerbated by the FCC’s cyber failures—makes this essential.”

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