Verizon won’t speed up 5G buildout despite FCC preempting local fees
Verizon Wireless says it will not move faster on building its 5G cellular network despite a Federal Communications Commission decision that erased $2 billion dollars’ worth of fees for the purpose of spurring faster 5G deployment.
The FCC’s controversial decision last month angered both large and small municipalities because it limits the amount they can charge carriers for deployment of wireless equipment such as small cells on public rights-of-way. The FCC decision also limits the kinds of aesthetic requirements cities and towns can impose on carrier deployments and forces cities and towns to act on carrier applications within 60 or 90 days.
FCC Chairman Ajit Pai justified the decision by saying it would speed up 5G deployment, and he slammed local governments for “extracting as much money as possible in fees from the private sector and forcing companies to navigate a maze of regulatory hurdles in order to deploy wireless infrastructure.”
But in an earnings call last week, Verizon CFO Matt Ellis told investors that the FCC decision won’t have any effect on the speed of its 5G deployment. Verizon also said that it is reducing overall capital expenditures—despite a variety of FCC decisions, including the net neutrality repeal, that the FCC claimed would increase broadband network investment. (Verizon posted a transcript of the earnings call here.)
Verizon already building as fast as it can
An analyst asked Ellis if the FCC order would “change the sort of internal targets you have for the rollout of the small cell and 5G infrastructure and possibly allow you to go a little faster as you look out to 2019 and 2020.”
Ellis responded that the FCC decision “doesn’t necessarily increase the velocity that we see.” Verizon is “going as fast as we can” already, he said.
Ellis said:
Our teams have been engaged with municipalities across the country on getting permits to put up small cells, whether for 4G or 5G. [We] certainly like the fact that they are providing a little more guidance for how quickly that should happen, but I don’t see it having a material impact to our buildout plans. We are going as fast as we can. And while the federal-level rules are helpful, it is still a very local activity municipality by municipality. So a lot of good work going on there.
Ellis also said that Verizon’s “capital expenditures for the full year [will] be between $16.6 billion and $17.0 billion.” That’s down from $17.2 billion in 2017 and potentially below the low end of Verizon’s initial 2018 projection. In January, Verizon projected that its 2018 capital spending would be “in the range of $17.0 billion to $17.8 billion, including the commercial launch of 5G.”
No guarantee of more broadband
Before last month’s 5G preemption vote, Pai claimed that “big-city taxes on 5G” slow down deployment in big cities and “jeopardize the construction of 5G networks in suburbs and rural America.”
Yet Pai offered no evidence that deployment decisions in rural areas are affected by permit fees in big cities. Notably, Pai’s plan did not require carriers to deploy any more broadband than they otherwise would have—in fact, the carriers had already promised nationwide 5G networks.
In other words, Pai’s order provided financial benefits to carriers, reduced municipal revenue, and reduced local control over telecom infrastructure on public property—all without guaranteeing any extra broadband deployment for Americans.
New York City CIO Samir Saini previously accused the FCC of “handing taxpayer-owned assets over to multi-billion dollar telecommunications companies, and encouraging them to run wild on our public rights of way.”
Verizon’s comments confirm what opponents of the FCC preemption said—that the FCC action provided no reason for carriers to invest more in rural areas. The FCC decision “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,” former FCC Chief of Staff Blair Levin wrote in a blog post before the FCC vote. “At the same time, states and localities will be forced by federal mandate to bear all the costs and receive no guaranteed benefits.”
“They are going as fast as they can without the preemption,” Levin told Ars, in response to Verizon’s recent comments. “The FCC action will have no material impact. In other words, everything the FCC said about how the new rules would speed things up was untrue.”
The FCC claims its decision will “eliminate around $2 billion in unnecessary costs” from the $275 billion that carriers are expected to invest in next-generation wireless infrastructure over the next decade.
FCC Commissioner Jessica Rosenworcel, the FCC’s only Democrat, said that this level of savings won’t spur extra deployment, “because the hard economics of rural deployment do not change with this decision.”
Verizon complaints helped FCC justify vote
Despite now saying that the order will have no effect on its 5G plans, Verizon previously urged the FCC to preempt the local fees and rules. The FCC justified its decision in part by pointing to comments from Verizon, while dismissing objections from municipalities.
The FCC order said:
Verizon states that a Minnesota town has proposed barring construction of new poles in rights-of-way and that a Midwestern suburb where it has been trying to get approval for small cells since 2014 has no established procedures for small cell approvals. Verizon states that localities in New York and Washington have required special use permits involving multiple layers of approval to locate small cells in some or all zoning districts. While some localities dispute some of these characterizations, their submissions do not persuade us that there is no basis or need for the actions we take here.
We asked Pai’s office today to explain why the FCC decision is having no impact on the pace of Verizon’s 5G deployment and will update this story if we get a response.
