US regulator the FCC has reformed the rules of the Citizen Broadband Radio Service (CBRS). The changes make licences much longer and wider in geographical scope; this will be seen favourably by the largest mobile operators in the country, whereas small local players will now struggle in obtaining licences. With this ruling, coupled with recent decisions aiming to streamline small cells deployment, the FCC shows its intention to facilitate the ability to grow at scale in 5G; something that large carriers consider crucial for the success of 5G. While such an approach could hinder innovation coming from smaller operators and new entrants, it shows that the FCC has a clear vision of what 5G should look like in the US, and is taking steps to make it happen quickly.
The FCC has made licences longer, and assigned them to larger geographic areas
On 23 October 2018, the FCC passed an order amending the rules governing the CBRS, an innovative, three-tiered spectrum sharing framework operating in the 3.5GHz band. The framework was launched in 2015, and has been seen as an effective enabler for mobile broadband services deployed by local ISPs. The new rules retain the three-tiered structure, which is still made up of incumbents, Priority Access Licenses (PALs), and General Authorized Access (GAA) users. However, PAL licence areas are now significantly larger, since the FCC voted to move from an approach based on census tracts (which are circa 74k in the whole US), to one based on counties (of which there are about 3,100).
The length of PAL licences also increases more than three-fold, moving from the current three-years period to 10 years The order also establishes end-of-term performance requirements; ensures that seven PALs are available in each licence area; and allows partition and disaggregation of PALs, which means PALs can be broken down and sold in a secondary market.
Large carriers are the main winners, but not all the small players are unhappy
The big carriers, which reportedly pushed for the FCC to adopt these changes, appear to be the main winners. The statement issued after the vote by the CTIA, the association which includes the largest US carriers, reflects this; and a blog post of the CTIA, published earlier in October, explains more in detail why large carriers welcome the FCC’s new approach.
Significantly enlarging PAL areas means that PALs are now more costly, and will require licensees to have a much wider reach compared to the local players operating in census tracts; this means it will be much harder for small operators to obtain PALs, unless they obtain them through the secondary market. The FCC’s ruling does introduce “bidding credits” for rural entities, which means small/rural business can take advantage of 15% bidding credits when they try to get PALs; however, despite this provisions, PALs are likely to be no longer affordable for such operators. A statement issued earlier in October by the Wireless Internet Service Providers Association (WISPA) highlighted these concerns. After the FCC’s vote, WISPA restated its disappointment: “[...] This new policy is likely to slow the rollout of 5G by reducing market entry of disruptive new competitors, and it will result in lower auction proceeds.”
Other competitive carriers, united under the Competitive Carriers Association, took a different view, and applauded the FCC’s decision, saying that rural carriers now have a “meaningful opportunity” to acquire spectrum and provide services. The Rural Wireless Association took a similar stance, arguing that the FCC’s decision “should strike an appropriate balance”.
The FCC has recognised that scale is a key driver of 5G
At the Digital Regulation Forum in London, in April 2017, Tom Dailey, VP and General Counsel – International at Verizon, summed up US operators’ 5G strategy in one sentence: “Scale is the name of the game”. In other words, 5G requires plenty of vertical integration, and the creation of an entire ecosystem across three layers: connectivity, platforms, and applications. With its latest decision, the FCC appears to share the view of the need for scalability, and aims to foster investment from the big players by making spectrum licences more attractive to them.
Another recent ruling which streamlines the deployment of small cells, and prevents local authorities and states from introducing prohibitions, is a further testament to the direction taken by the FCC. Cities are prepared to fight on this, but in the meantime the big players have scored a point in their favour. Meanwhile, on the other side of the Atlantic, operators and regulators are still grappling with key issues to address as to what 5G in Europe will look like. One thing appears increasingly clear, as succinctly put by Johan Dennelind, CEO of Telia, at the recent FT-ETNO summit: Europe “we will not be the first on 5G”. The lack of a clear vision, and of a definitive direction, goes a long way to explain why this will likely be the case.
