Why is Republican Senator John Kennedy trying to hold up deployment of 5G technology here in the United States? How will he handle the national security risks of such delays? The Federal Communications Commission has approved a planned auction of valuable bands of spectrum that are urgently needed for deployment of the next generation of fast wireless telecommunications. This was carefully negotiated and won approval from President Trump, the technology industry, and taxpayer groups.
Under the planned auction by the Federal Communications Commission, this midband spectrum, sometimes called “C Band” spectrum, would be reassigned from satellite companies to telecommunications firms and others that need the spectrum to develop and build high speed cellular service. Foreign companies like Huawei of China have been aggressively pursuing this technology for years but, as the Wall Street Journal recently noted, this move by the Federal Communications Commission would be a significant step toward reestablishing American technology leadership.
That the United States must win this race is seen by many experts as vital for American economic leadership in a new industry that is expected to deliver some $500 billion of consumer and business services. The new technology may even be more critical for American defense. 5G is about more than faster phones. This fast wireless technology will be the central nervous system of the future economy. Almost everything will connect to it, such as cars, phones, infrastructure, and millions of “internet of things” devices. All of the data that is generated by these connections must be secured. That is why the United States banned Huawei from building our 5G networks, and why it is now sorting the national spectrum allocation to field the technology as quickly and as securely as possible here at home.
The fly in the ointment is Kennedy who, with some Senate Democrats, is threatening to blow up the deal. Kennedy believes the estimated nearly $10 billion incentive payments to the satellite companies, which currently have licensing rights to this spectrum granted by the federal government, and an additional $5 billion to cover costs, for example for new satellites that need to be launched, that could be incurred by these firms as they relocate, will be a corporate giveaway. “Shelling out billions for airwaves we already own is no way to handle taxpayer money,” he says, “especially when taxpayers want those dollars to support rural broadband.”
While his goal of securing more revenues for the government is worthy, and while there is legitimate debate about how much satellite companies are owed, it is worth noting that the government will make a huge profit from this auction, as much as $30 billion to $40 billion, depending on the public bids. If this is such a grand bargain for satellite companies, then why are their investors complaining the deal will hand them too little?
The final price tag was arranged following many months of negotiations between all the affected parties. Federal Communications Commission Chairman Ajit Pai, who brokered the deal, says that the main goal was the timely transfer of the spectrum. “This auction will get it done much faster,” he accurately explains, “by aligning the incentives of satellite operators with the incentives of wireless providers who want expedited access.” He is certainly right, and that concern aligns with the concern of Trump, who is focused on American companies achieving the technology lead in 5G.
Kennedy wants to cut several billion dollars from the incentive payments to the satellite companies. The problem is this only risks further holdups and, perhaps, endless litigation that would add delays to a process that has already taken too long. His intervention could easily blow up the deal entirely, in which case we all lose. It makes little economic sense to hold up deployment of a half trillion dollar technology industry that both our economy and military need, only in order to collect a few billion dollars.
Push may come to shove this week when Kennedy holds hearings on the spectrum auction. If he and Senate Democrats succeed in blowing up the deal, the biggest winner will not be American taxpayers or rural residents, but Huawei, the monolith enterprise owned by the Chinese government.
This piece originally appeared in The Hill on 03/10/20