Reader Sends Open Letter to FCC Commissioner Carr

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This section allows others to contribute their opinions. The content does not necessarily represent the views of, or endorsement by Inside Towers.

Commissioner Carr:

I read an article in Inside Towers last week about your proposal to modify regulatory rules in an effort to streamline the small cell application process for a more rapid deployment of 5G.  Unfortunately, it appears you are viewing the 5G/small cell situation strictly from a carrier perspective, based on your reference to the one-sided CTIA report (by Accenture) which stated that “advancing 5G deployments in the U.S. could add 3 million new jobs, $275 billion in private sector network investment and result in $500 billion added to the GDP.” And, based on your comments, it appears you are being misled.  All studies I have read regarding the costs associated with the deployment of 5G (ranging from $104 billion in iGR to $275 billion in Accenture/CTIA) completely — and conveniently — ignore the impact that legislatively-subsidized small cell fee caps will have on local governments (and ultimately taxpayers) as well as the cell tower/rooftop lease market, and it appears you are relying on those same studies to define your conclusion.  

You see, I have been involved in the “finance” side of cell tower lease business for the better part of 15 years, reading and analyzing thousands of wireless (“cell tower”) leases during that time.  Virtually all cell tower leases — despite typically being crafted with multiple five-year option periods which may extend from 25 to 50 years or more — contain an early termination clause, which permits lease tenants (most often carriers or tower companies) to terminate the lease for no reason, at no penalty, and with very little (typically 30-60 days) notice to the landlord.  When one considers this fact in conjunction with the arbitrarily priced small cell fee caps being proposed and passed by state legislatures around the country (15 at last count) — which amounts to a small cell fee reduction of between 83% and 97%, depending on the market — it becomes easy to understand why carriers and tower companies have already begun using the early termination clause to attempt to “force” lease rate concessions from cities (and private landlords) for associated cell tower and rooftop installations, both in and out of the public right-of-way.

To further illustrate, in Texas, the current small cell legislative fee caps imposed by the recently passed SB-1004 are estimated to cost city governments statewide, more than $800 million annually (plus escalators and not including the negative effects on cell tower lease values), which equates to between $12 and $16 billion dollars on a sale basis (if small cells were instead operated on a lease structure similar to cell towers, but at the typical market rate).  One can extrapolate the numbers in Texas to the continental United States and quickly realize that a national cap on small cell fees will ultimately cost taxpayers a projected cumulative loss in revenue/equity of between $160 and $180 billion. Then, one would need to factor in the long-term costs to cell tower leases — which will occur because of the small cell fee caps — to complete the equation, which could easily push the total number of revenue/equity losses past $300 billion nationally…more than the highest projected total cost for the rollout of 5G including planning, equipment, engineering, and construction (with enough left over to complete 50,000 miles of road repair).  

It is also important to remember: Verizon and AT&T each netted about $30 billion last year and projections for their respective earnings are continuing to trend upwards, just as they have in recent years.  These are companies with market caps of $200 billion or more, and they are now posturing as though the costs of 5G are going to break the bank.  It puzzles me that — with four national carriers each spending from billions to tens of billions each year on Capex — how does a worst case scenario of $275 billion over eight years create a need for a subsidy in the first place?

I could continue, but I think you get my point.  To read more about this issue, please see the articles that I recently had published in RealtorMag, American Cities and Counties, and Inside Towers.  Ultimately, the plan you are suggesting (and CTIA is supporting) will allow carriers (and perhaps tower companies) to legislatively subsidize the costs of their 5G infrastructure investment — which they have historically been responsible to bear since the days of 1G — to effectively nothing, while increasing each of their respective bottom lines obscenely in the process.  And lest we forget, carriers and tower companies are already poised to benefit greatly from the exponential increase in users, data, and devices that will most certainly occur as a result of the rollout of 5G, while — at the same time (if you continue with your plan) — dramatically reducing the rates each carrier and tower company will pay to their cell tower lease landlords for the foreseeable future (further increasing their respective bottom lines!).

Please let me know how I can be of assistance.  I possess a great deal of expertise in the cell tower lease industry, and I have some great alternatives to the currently proposed “solutions” that will more fairly spread the cost of 5G among all interested parties…not just for the benefit of a few at the top.  Please keep this email in mind when you bring this issue to vote before the commission on March 22.

Sincere regards,

James  Kennedy

P.S. CTIA (the source of your data) states in their own website that “CTIA represents the U.S. wireless communications industry…”, which should supply a bit of perspective.  In addition, while (small cells and) “5G deployments, which can be smaller than a backpack and attach to existing structures,” as mentioned by you in your remarks entitled “SUMMARY OF COMMISSIONER BRENDAN CARR’S REMARKS ON ENSURING THE U.S. IS 5G READY,” is sometimes true, there are instances when “small cells” can be installed on infrastructure which exceeds 100 feet in height along with ground equipment the size of a refrigerator next to the “small cell tower”, ultimately making the term small cell a bit of a misnomer, and creating a small cell installation that would be indistinguishable from, and sometimes far worse in terms of aesthetics than a monopole to most casual observers.  So, in addition to the other issues I hope to bring to your attention in this email, please exercise extreme caution when imposing overly restrictive language into new FCC rules that will prevent local governments from adequately conditioning the visual impact of small cells.

By James Kennedy, CEO/Founder,  SteepSteel

March 5, 2018

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