Memo to President-Elect Trump: Networks are a Critical Part of Infrastructure
President-elect Trump says he wants to spend upwards of one trillion dollars “rebuilding our nation’s infrastructure”. I urge him to consider that mobile and broadband networks, along with connectivity, are just as important for business and national competitiveness in the 21st century as improving our roads, bridges, airports, and the energy grid.
So far, the incoming Trump administration has signaled a key telecom priority will be reversing what it believes to be the Obama administration’s bureaucratic overreach, with net neutrality being the poster child. It’s consistent with Trump’s views on the Affordable Care Act, Dodd-Frank, and other issues.
But Mr. Trump, and the soon-to-be Republican majority FCC, should not ignore the significant progress made in improving the nation’s broadband infrastructure during Obama’s presidency and Tom Wheeler’s FCC tenure. Over the past eight years, we have seen:
• The launch of four national 4G (LTE) networks. Although our roads and airports might be “third world”, our wireless networks are among the best in the world and mobile data usage is among the highest.
• The FCC setting the stage for continuing this leadership with 5G, under the Spectrum Frontiers Act announced last July.
• A series of successful spectrum options, resulting in an approximately 50% increase in the amount of spectrum held by the leading wireless operators.
• Several broadband-related initiatives which have led to an increase in household broadband penetration from about 60% when Obama took office to more than 80% today.
• A significant increase in average broadband speeds, from less than 10 MB download at a typical household in 2009 to more than 50 MB today. Among other things, this has enabled successful video streaming services such as Netflix and the ability to consider new, over-the-top (OTT) options for television.
• The 3.5 GHz spectrum sharing initiative which, if successful, would be a first and a model that would surely be adopted by other countries.
• Robust capital expenditures by broadband and mobile operators during Obama’s term. North America and China are the world’s capex ‘bright spots’. Europe is stagnating and Latin/South America is challenged.
I would like to see the Trump administration build on these trends. Rather than spending a lot of time and energy on dismantling, reversing, and score settling, Trump should send the message that re-establishing our nation’s physical infrastructure as the ‘envy of the world’ includes having the world’s best communications infrastructure.
There are three priorities, in my view. First, we need more, better, and cheaper broadband. Although the U.S. leads in many metrics related to mobile networks, our fixed broadband networks are, on the global stage, decidedly middle-of-the-pack. Household penetration is stalling – getting that last 15-20% is not going to be easy, both physically and economically. Investments in fiber to the home initiatives have stalled, with AT&T and Altice being among the lone bright spots. And we need more competition in broadband. More than 50% of households have a choice of only one decent broadband provider. I’ve always been surprised at the FCC/DOJ’s position on wireless operator consolidation, given the near monopoly structure that exists in broadband. The lack of competition also makes broadband service comparatively expensive.
Over the next few years, we are going to need a significant increase in speeds and broadband capacity to accommodate the 4K TV, AR/VR, & 500 GB+ per month consuming household, circa 2020. I am not sure the current telco/wireless incumbents can fund all this themselves. What can Trump do? He can take a serious look at finding a way for some of the ridiculously wealthy internet players (Netflix, Apple, Amazon, Google, Facebook) to fund some of this. He can also earmark more of spectrum proceeds into some level of subsidy for network construction, rather than see tens of billions of dollars melting into the miasma of the Dept. of Treasury.
Second, we need to continue the momentum in mobile. The Wheeler FCC achieved a lot in making more spectrum available, developing an innovative spectrum sharing scheme at 3.5 GHz, and laying the groundwork for 5G. There is still a lot of work to be done here and these are complex issues.
I would not be opposed to consolidation in wireless, particularly if it appears we can’t have four healthy, profitable wireless operators. If Sprint does not have the resources to truly leverage its 2.5 GHz assets, then let’s get it in the hands of an entity that can. And let’s get DISH to put its treasure trove of spectrum, which the company has been amassing and sitting on for years, to work.
On 5G, the Trump administration has a great opportunity to make this a category of infrastructure where the U.S. leads the world. A great deal of innovation is already coming from U.S.-based companies. Trials will begin in earnest in 2017. There is still a lot of work involved to ensure the millimeter wave bands are, in fact, viable for commercial wireless services. The public sector can also play a role, developing a structure that will make it easier to deploy the vast number of sites required for 5G in cities.
5G will also push the question of what networks and the industry structure will look like in the early 2020s. Will we still need separate fixed and mobile network subscriptions? How can public infrastructure be leveraged to facilitate the deployment of the millions of Wi-Fi/5G-equipped small cells and the concomitant backhaul capacity? Can fixed wireless, with small cells 100 or 200 meters from the home, be a viable alternative to fixed broadband?
Third, I believe IoT can play a significant role in infrastructure improvements envisioned by Trump. We are at a tipping point with IoT: module prices have come down, purpose-built IoT networks are being built in both the licensed and unlicensed bands (see my December 2 column, The Emergence of Purpose-Build IoT Networks), and both enterprise and industry are investing in the sector. So IoT is starting to happen.
All of these devices and sensors can play an important role in key verticals such as transportation, smart grid, smart cities, and so on. The new administration can encourage the use of sensors to make our infrastructure smarter, cheaper, more efficient, and data-driven. Major tech companies, from Cisco to IBM, are aligning to play a role here. This will also require better coordination between various branches of the public sector, including municipalities.
On a final note, it has been interesting to see that Trump has filled several senior positions with executives from the private sector – mainly the financial and energy industries. Why not bring in some of the tech industry’s all-stars to help “Make America Great Again”? After all, many of these people, and the companies they founded or led, have been among the “Greatest Things About America” over these last several years.