The rapid deployment of 5G technologies has become a stated objective of the Trump Administration that reaches across a wide range of economic and security equities. These include economic competitiveness and productivity interests traditionally represented by the National Economic Council and the Department of Commerce, as well as network security and trusted-vendor supply chain interests represented by defense, trade and national security agencies. Underlying all of this, the FCC is grappling with how to replace Chinese and other foreign adversary equipment in rural networks, as well as diverse competition and spectrum issues that are critical to incentivizing industry deployments.
Given this range of overlapping government interests, has policy making on 5G become too diffuse? Join Federalist Society members Tricia Paoletta, Lawrence Spiwak, and John Kneuer as they discuss the legal and policy issues driving the Administration’s and FCC’s 5G agenda.
Hon. John Kneuer, President and Founder, JKC Consulting LLC
Patricia J. Paoletta, Partner, Harris, Wiltshire & Grannis LLP
Lawrence J. Spiwak, President, Phoenix Center for Advanced Legal and Economic Public Policy Studies
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Operator: Welcome to The Federalist Society's Practice Group Podcast. The following podcast, hosted by The Federalist Society's Telecommunications and Electronic Media Practice Group, was recorded on Friday, March 27th, 2020, during a live teleforum conference call held exclusively for Federalist Society members.
Dean Reuter: Welcome to The Federalist Society’s Practice Group teleforum conference call as today we discuss the development of the 5G network. I’m Dean Reuter, Vice President and General Counsel of the Practice Groups of The Federalist Society.
As always, please note that all expressions of opinion are those of the speakers on today’s call.
We’re very pleased to welcome three guests to our call today. We’re going to hear opening remarks from each of them in turn of about 5 to 10 minutes or so on the topic, and then we’ll be turning to the audience for questions, so please have those in mind for when we get to that portion of the call.
We’re going to hear first from John Kneuer. He’s President and Founder of JKC Consulting, former Assistant Secretary of Commerce for Communications and Information, principal advisor to the President of the United States on telecommunications policy, and the Administrator of the National Telecommunications and Information Administration.
Second in our lineup will be Patricia Paoletta, a partner at Harris, Wiltshire & Grannis, where she specializes in telecommunications, trade and technology policy.
And then we’ll finish up with opening remarks with Lawrence Spiwak, President of the Phoenix Center for Advanced Legal and Economic Public Policy Studies, which is a non-profit 501(c)(3) organization that studies broad public-policy issues related to governance, social and economic conditions, with a particular emphasis on the law and economics of the digital age. With that, John Kneuer, the floor is yours.
Hon. John Kneuer: Thanks, Dean, very much, and thanks everyone, and my fellow panelists for joining and for those of you dialing in. I thought I’d open the discussion on 5G with a somewhat backward-looking view at the traditional telecommunications policy legal and regulatory framework. And the reason I wanted to talk about that is because the challenge with 5G or how 5G has evolved as a policy discussion in the United States, and I think internationally, is that it’s a telecommunications subject, but it is now perceived as so crosscutting in terms of its macroeconomic impact, its trade impact, its security impact that voices not typically involved in the telecommunications legal and policy debate are increasingly becoming heavily involved.
Historically—and when I was in government and as a legal practitioner around the telecommunications regulatory space—there was very traditional sources of authority and of policymaking influence. Inside the Congress, the focus was in the commerce committees in the House, in the Senate, with a secondary or a companion role by the judiciary committees to the extent that antitrust issues around former monopolies and the merging of companies were involved.
Within the Executive Branch, there is the agency inside the Commerce Department that I had the privilege of leading during the second Bush Administration, the National Telecommunications and Information Administration, which has a dual-policy function, dual responsibilities, as the manager of all the federal and government radio spectrum, and then also as the principal advisor to the President on economic policy issues that pertain to telecommunications in the economy. And then, of course, there’s the Federal Communications Commission independent agency as the primary regulator, again with the companion role by the FTC, the Federal Trade Commission on some competition issues.
And typically, industry and government equities around telecommunications issues knew where to plug in to each of these components. So, if Congress is taking up a piece of reform, a pro-competition statute, the place you go to talk is to the commerce committees who have oversight jurisdiction over both NTIA, and the administration, and the FCC. They’ve got the institutional knowledge and the subject matter expertise.
If that legislation were going to impact federal equities in some way, very often in the relocation of spectrum in a long history of Congress passing legislation directing the administration to identify spectrum to be repurposed for commercial use, NTIA and the administration would have views on that. NTIA, while housed inside the commerce department, is actually tasked with being the representative of all of the federal government equities that have an interest in a spectrum issue or telecommunications policy issue, and then obviously, of course, and most directly is the Federal Communications Commission as the primary regulator of the telecommunications industry.
So that legal structure, that legal regulatory policy structure which has been applied to every telecommunications issue—whether it had been spectrum issues; it is network security issues, broadcast issues, whatever it may be—that has been the well understood legal policy and regulatory framework. I think the interesting thing and the challenging thing with regards to 5G is that it has taken on this life of its own, where it is viewed by stakeholders across the government and across the economy as something much more important and bigger than pure telecommunications policy.
So there are clear national security issues around the manufacturer of these networks and the control of the supply chain. There are broad macro-economic issues that are being managed and voiced in the White House through the National Economic Council because this is viewed as a transformative, comparative advantage that the United States could gain or lose in our international trading relationships. There are public safety and other issues. And so as each of those equities are identified, new regulatory and legal paths open up to influence 5G policy and 5G outcome.
So I’m going to turn it over to Tricia to talk a little bit about that dynamic and about how the growth of 5G is sort of a pan-economic—if that is even a word or a concept, Larry will correct me later—but something that is so all-encompassing to our economy that it’s broken out of the telecom legal regulatory space. And what does that mean? Is that accurate? If it is accurate, what does that mean for law and policy on something as important and that cuts across as much as the economy as this?
Patricia J. Paoletta: Thank you, guys. As John noted, right, it is pan-economic. I like that term, until Larry says we can’t use it. And the reason that is -- I’m just going to back up a little bit and try to explain what 5G might be. Because, obviously, it is a term used by anybody who wants anything in Washington these days. But the mobile operators and their vendors would define 5G as that which comes out of their standards body, which is 3GPP, and that’s an amalgam of different global, regional standards bodies, and as they’ve defined their standards, which they then take to the United Nations International Telecom Union, there’s three major types of applications for 5G.
You have what most listeners might think of as just your faster smartphone, enhanced mobile broadband, or it might also go into other applications like the virtual reality glasses that gamers might use or whatever. But enhanced mobile broadband largely for the consumer, the enterprise because we all know digital communications has gotten so widespread in our economy. Almost every service sector is out there with their iPads, and their sensors, and what have you. So enhanced mobile broadband.
And then critical communications is another suite of 5G applications, and that would be ultra-reliable low-latency communications, things where you just cannot have any latency such as in connected cars. So that’s another promise of 5G is that much wider broadband channels, but also very low latency, so connected cars, like I said, telemedicine; one day maybe even remote surgeries, earthquake sensing, anywhere where you absolutely have to have no latency or very complex industrial applications.
But then you have another range of applications, internet of things, and that can be slower communications. There might be sensor data from millions of different devices spread out across some kind of broad network, like environmental sensing or, again, earthquake sensing. But there, the 5G standards, again, through 3GPP, had been developed to have massive connectivity, and that’s the gamechanger from 4G as well. 4G fast smartphones—5G will be faster smartphones, but with 5G, you have much, much denser connected IoT networks.
And I think that, in addition to the other applications -- but, primarily, the internet of things, application I think is where some of the security concerns from our national security agencies, and our Defense Department, and from Commerce, and from a range of agencies, get more interested. Because with each new connected link, right, that’s another threat factor, right, another surface where information could be attacked and targeted. And, of course, in the early days of internet of things—because that’s been out for a long time at this point through earlier technology—you didn’t have as many things connected, so you didn’t have as many threat services. So I think it’s that which has gotten people nervous.
And, of course, in some of the other applications, right, with critical communications or enhanced mobile broadband, you have the ability through a range of these 5G applications to enhance machine learning and artificial intelligence. And I think that is where -- well, we’ve gotten 20 minutes into this, and we haven’t even said, “Win the race to 5G.” But that is why the U.S. agencies have been so focused on “winning the race to 5G” as has the industry. And some of that’s been hyped to get more spectrum. We can talk about that later.
But it is because the widespread deployment of 5G will better position the U.S. to have the infrastructure in place to do more enhancement and development of artificial intelligence, machine learning, and I think those are the critically advantageous technologies of the future that position the U.S. to be on the leading and the innovation curve, right? So that is why you get all these agencies very excited about it.
Now, again, what is 5G? 5G is, like I said, used by the mobile operators and the vendors is what they’ve defined and what they call release standard coming out of 3GPP. Release 15 and 16, and 17, they’re working on, so it’s Release 15 and above. But 5G, it’s not a term that they only claim to, so you also have the Wi-Fi crowd, the 802.11 crowd. Wi-Fi 6, what we’re developing, is critical to the 5G ecosystem. Because as we’ve seen, every new generation of cellular increasingly—well, particularly since 3G and 4G—has relied also on Wi-Fi offloads.
5G is not just one standard, it’s a whole ecosystem, which, wow, we also didn’t say until 20 minutes into this. But, anyway, I think because of what these technologies can do in terms of the broader innovative competitiveness of the U.S. in a global market, that is why -- and, of course, the security threats, as I mentioned, that’s why you have these agencies so focused on it. But Larry can talk on it a little bit more about what it is, and what it isn’t, how it’s driving policy. But because this is a legal call, right, that I’d spend a moment on and what has been happening in this space.
And, obviously, the -- gosh, was it 2017? It was pretty early days—2018. When there was a memo that was snuck out of the White House that proposed to nationalize 5G, obviously, that got battened down. But it does reflect how intense are the feelings of the Defense Department and others in terms of the need to make sure it’s a secure network, and the U.S. is harnessing this new technology to position itself for these technologies of the future.
But more recently, of course -- and all this has been all so wrapped up in concerns about Chinese vendors, right, Huawei and ZTE, then, to give a name to it. So I think you have this coalescence of realizing the importance of 5G in terms of economic innovation, and also realizing “Okay, we’ve been turning a blind eye to surveillance and intellectual property theft from China for too long,” and given their more aggressive stance over the last decade, in terms of a range of activities: building islands off in the China Sea, and what have you. With their Made in China 2025 strategy, I think a lot of these concerns about the U.S.’s competitiveness of 5G has aligned with a more clear-eyed view of what China had been doing to put itself in a leading position in telecommunications policy, in particular, 5G.
And, of course, the Made in 2025 strategy by the Chinese certainly includes the telecom space, and so that has aligned. This administration—and I’ll wrap up quickly, Larry—but this administration, you had a national cyber strategy that was put out early in the administration talking about the need to secure 5G networks and be a leader on it—so both the security side as well as the technological leadership side. In May of 2019, the President put out an executive memo on securing the supply chain of information communications technology supply. That’s being worked on.
And, of course, just yesterday, right, they put out their national strategy on securing 5G. They had been working on that, but that was also in reaction or will fulfill the very recently passed and signed bill called Secure of 5G and Beyond. So there’s a lot of activity that has really coalesced just in the last month, or so, on making sure that 5G is secure and that again the U.S. continues to be very innovative in this space.
Because just China with the sheer numbers, right, they’re a much bigger country, and they’ve had basically an industrial policy where the Chinese government mandates that the three mobile operators in their country, which are all Chinese owned, all government owned, have to buy Huawei and ZTE at above global market rates so they get subsidizations with their own country by mandating the purchase of Huawei and ZTE equipment.
So then Huawei, and ZTE, and others can go around the world selling it at rock bottom prices and beat out any western supplier. So this is has been kind of a crystallization of both the importance of 5G in terms of economic innovation across the board, but also realization that China has been doing policies that are contrary to how the U.S. has structured its market and our western allies. So I’ve veered off into a lot of subjects. I’m going to stop here and turn it to Larry.
Lawrence J. Spiwak: Thanks, guys. I really appreciate to be on the call with everybody today. So as Dean said, at the beginning, I work at a think tank. So we don’t lobby. We don’t write pleadings. And that distance allows you sometimes to get sort of a healthy skepticism of what’s going on. We focus on the law and economics of the problem, but it allows us to sort of sit back and watch the political passion play come out.
So you hear a lot about the phrase 5G. We’ve talked about that. So I guess to start my presentation is what exactly does the race to 5G mean? And we’ve all been doing this business a long time, and what I have learned is that to get things done in Washington, you need a slogan. We’ve always had a good slogan. We’ve had the digital goodbye. We’ve got the homework app. We had the exaflood. Broadband for everybody. Now, we’ve got “winning the race to 5G.” And I think it’s great because we finally get some motivation.
My regret is after being involved sort of watching the -- since the wireless industry sort of exploded, I wish we had put this much effort in the first generation, the second generation, the third generation, the fourth generation. But we’re doing it now, and that’s really good to know. But the flip side to that is that slogans do not provide answers to, as John said, sort of the complex legal and economic questions that you’re always having to deal with in terms of spectrum policy. But we do have a slogan. The slogan gets you, perhaps, the political cover to move forward where we’ve had difficulties in the past.
So let me give you three examples where I think the administration—and I use that phrase very broadly in terms of all -- in fact, all of Washington has been able to use this concept of the race to 5G to do some good. I think the first and foremost is that it is now creating the impetus and a good story to really focus on a longstanding problem in telecom, which is removing local government barriers to entry.
This has been a problem that has plagued the industry for years, power citing in particular, and now the FCC, to its credit, is really stepping up and trying to do what it can to remove those barriers. That case is now pending, I think, in front of the Ninth Circuit, but they deserve a lot of credit for pushing the edge of that envelope. That’s always a very delicate thing when you start telling states and localities what they can do. But that’s been, I think, a real plus out of using the mantra of “winning the race to 5G.”
And the second thing is in spectrum repurposing. I don’t think we’re quite there yet, but, at least, we’re talking about it. There’s a lot of problems with -- as former NTIA, Dave Redl said, a while back, the era of easy spectrum decisions are over. So we can talk about various spectrum repurposings, which is sort of a subsidiary of this, but, at least, we’re having that conversation.
And I think, probably, the most important of this—and we’ve talked about this on the call so far—is that the federal government is finally really aggressively taking steps to protect the nation’s critical infrastructure. This has been a longstanding problem, and now we’re seeing very concrete action to a very, very real problem. So I think the administration deserves a lot of kudos for that, as I think John mentioned, they just released, I guess, last week the National Strategy to Secure 5G plan. The administration did.
We have our positives, but let’s also be honest, as politicians are not telecom lawyers or economists, slogans can be used, and I think that has increasingly led to cutting a lot of legal corners, and that is what’s very troubling to me. The hype coming out of some circles has been really amazing, although, I disagree with Senator Kennedy who supports the C-Band. If you caught his speech on the Senate floor, he was lamenting on how badly the hype is about 5G, and he actually said—and I’m repeating this because these are Senator Kennedy’s words, not mine— “5G is so wonderful, it can cure erectile dysfunction.” And I wanted him to say that on a FedSoc call, but again, his words. [Laughter] I was like, “Now, I’ve seen everything.” So, if Senator can say that on the floor, that’s where we are in the U.S. telecom debate.
But I think he has a point about the overhype, and you’re starting to see, again, a lot of corners being cut or things that might have been subject to stricter scrutiny but for telling the story of the magic of 5G. And let me give three examples in my mind. One is the Sprint, T-Mobile merger. I don’t have a dog in the fight. Should the equilibrium be three? Should the equilibrium be four? Maybe it’s three. We want this whole zeitgeist of -- we’ll let Sprint, T-Mobile merge, and then Dish will come in, and they’re going to build a fourth.
Putting all that aside, what I find interesting—and I use that word with a bit of sarcasm—is that this whole deal was justified, and you see a lot of conservatives making this argument, that it’s okay because of the imposition of totally uneconomic voluntary buildout requirements. Now, if this would’ve been the prior administration, and former FCC Tom Wheeler would’ve done this in the Obama administration, people would’ve been up in arms. “This is horrible. This is horrible.” But now we see “Oh, but it’s great.” 5G on economic buildout requirements. We need to sort of highlight that.
The second example I think you see—and this has been a huge fight here in Washington—is a company called Ligado Networks. Ligado Networks was a company approved on delegated authority under the Obama administration thinking that they can have yet another facilities-based network. It wasn’t even approved by the commission, and they were going to use this L-Band spectrum, and it turns out after they approved it because they promised—and we’ve heard this before—a new nationwide network. It turns out that there was massive interference, and the FCC, after they granted it, the FAA came in and NTIA came and said, “You have a real interference problem here. Fix it.” So for the last 10 years, Ligado has been trying to fix that, and they make some issues.
But the FCC’s rules are very clear. The burden is on that company to show that they have satisfied all interference concerns, right? If they can do it, fantastic. But NTIA, working with a bunch of Executive Branch agencies, has said, “Look, we have interference concerns,” but yet now you’re having all these other agencies jump in. Bill Barr has jumped in. He said, “Oh, you should grant it.” I’m not sure what the Department of Justice’s broadband portfolio is, but now you have all these different agencies because they’re selling it as “Well, this is great. We need the mid-band spectrum.”
Well, I’m sure we’d all like to have extra mid-band spectrum, but that’s not the issue. The legal is issue is, have you satisfied the FCC’s rules or not? And you see that a lot going around. People are forgetting that there are rules. So either we have rules at the Commission that are enforceable or they’re not. And that’s the example.
And then I think that third example you’re starting to see is this company called Rivada Network, which is—Newt Gingrich has been very critical—where they basically want to get access to government-owned spectrum but held by the DoD, and this was floated, I guess, about a year and a half ago that the government should own a government-owned network or, at least, a private-partner network. And that will provide 5G.
And I remember I was driving downtown somewhere, and Newt Gingrich got on “Because this will totally change the economics with 5G, and it’ll drive the Chinese out.” I’ve been doing this business a long time, and I work with some of the best economists in this business, and the only thing that that is going to do, having a government network, is drive out the private sector. Because if the equilibrium can only sustain one firm, having somebody come in and have predatory entry by the government is not going to do it.
You’re starting to see this race to 5G stuff really just get out of control, in my mind, just in terms of the discussion. Because I think for those of us—certainly the three of us who are on this call, who have been doing this a long time—telecom is a hard business. There’s a lot of stuff that’s going on of how do you -- again, how do you repurpose spectrum from low to high value uses. How do you deal with interference externalities? How do you deal with -- if you’re trying to do a market-based solution, so to speak, how do you then deal with holdouts? Where the last person says, “No, I don’t want to do that. Do you have a transaction window?” These are the issues that I think that we need to be focusing on, but yet when people start throwing around this phrase 5G, that’s not an excuse to tuck corners. So with that, that sort of my take on that.
Dean Reuter: Well, thank you all. I want to give John and Trish a chance to expand their thoughts.
Patricia J. Paoletta: Yeah, part of the same is people not staying in their lane. I’ll jump mine and pretend to be a moderator here for a moment. But it’s interesting to me because part of the underlying question we’re supposed to answer, right, has spectrum policy become too diffuse in this era of 5G? And both John and Larry’s remarks made me think of there are criticism I’ve seen of some of the other agencies where they’ve not played ball with the FCC or with NTIA and kind of gotten out there in front, and on their own letterhead, sent letters off to the FCC.
And I’m thinking of Department of Energy with respect to the FCC’s proposal with the six gigahertz band for the next generation Wi-Fi and other unlicensed technologies or Department of Transportation setting off messages, and what have you, in the 5.9 gigahertz spectrum for connective car technology and sending that off to the FCC, and not going through the proper channel of NTIA, which is supposed to manage federal spectrum.
So a question to John is, is this really unprecedented? Did you say when you were running NTIA, didn’t you see some agencies kind of getting over their skis and trying to go around, behind NTIA’s back and deal directly with the FCC, or is something about 5G really made everybody’s heads explode and jump in their lanes?
Hon. John Kneuer: That’s interesting, Tricia, because I was going to circle back to that exact point. Larry, you quoted one of my successors, David Reynold, saying that “The days of easy spectrum decisions were over.” They weren’t easy before, right? I’ll have to give David a call about that. For precisely the reasons you’re talking about, Trish, and that going back to 1G—well, certainly, 2G, the second G, the first digital spectrum allocations, and the first spectrum that was auctioned off—those were the first bands of spectrum that required the federal government to clear out of the space that they were occupying.
As a consequence, everyone’s spectrum decision, going back to the mid-90s, have impacted significant federal government equities, and the challenge has always been to resolve those equities within the Executive Branch and then speak with a single voice. The guidance that we got when I was in government was, when we’ve got a choice between preserving our national security or economic security, we do both. And, if there are hard operational challenges, we wrestle those hard, operational challenges to the ground under the guidance of the final authority in the Executive Branch, which is the President. And that would be done through coordination of the National Economic Council.
So the policy coordination process, in any administration, requires diverse equities inside the government to be corralled and managed through the White House process. So while there may be issues at the Defense Department that trigger national security issues, there may be issues in the Transportation Department that trigger economic security issues, or just broader economic issues, and to the extent that at the staff level, the sub-cabinet level, those are not being coordinated and resolved through NTIA, then those things get elevated into the White House. And the White House convenes the policy coordination process with the specific White House equities, with the National Security Council, National Economic Council, the Office of Management and Budget policy apparatus. And you bring that inter-agency negotiation into the White House, and compromises are struck on these issues.
And, ultimately, they can start at an assistant secretary level. They can start at a deputies level—move to what they call a principles level. And, ultimately, the ultimate-policy coordination process in any administration is time in the Oval Office with the President, with the President making a decision on what the go-forward strategy of his administration is going to be.
In my experience, having telecom policy issues go all the way through to the Oval means that the people below did not do their jobs very well. There always has to be a way to resolve these things. I would quibble a little bit with you, Larry, on your articulation that the standard for incumbents or proponents of a use of spectrum is that they must resolve all complaints. A complaint isn’t enough, but I think you make a very good point that people are using 5G as a “thumb on the scale” to give their particular complaints greater value or greater weight in this messy coordination process.
I think that’s what 5G is putting pressure on the system, that different equities in the government say, “I’m not going to engage in a telecom policy process. I’m the Defense Department. I’m going to say what I want to say, and I’m going to say it directly.” And I understand where that sort of impetus comes from. The challenge is having the White House managing the process to say, “Guys, I get it. You’re important, but this is a whole of government issue and how do we corral that together.”
Dean Reuter: What does this all mean? Coordinating policy is one thing, but when agencies are influencing, and if not setting policy through enforcement actions, what’s the mechanism for unified or unitary executive? And here I’m thinking in particular of the FTC Qualcomm case where -- and what I’m hearing from people—and I’m no expert—but I’m hearing this as national security implications. FTC’s started an enforcement action over the objection of one its own commissioners, and it’s persistent.
It seems to be beyond the control of the White House, and yet I’m being told it has national security implications, so I’m curious as to how you end up with a unitary executive when you have independent agencies, not just setting policy through formal processes but through enforcement actions. But I’ll set that aside for now, but let’s turn now to our first caller.
Caller 1: First, let me warn you, you’re talking to a man who still uses a flip phone, so I’m a bit out of my depth, but I’m interested in the policy. And the last two comments have touched on the thing that interests me the most. It seems that the perspective of national security is the principle one. Because if the Red Chinese won this thing, then the value of 5G to the American industries is going to be largely how much they can export it. But the unitary Executive is the issue.
Is there a value, or a necessity, or even a danger of a “drug czar”—I hate to use that phrase—but one office, one cabinet, one person, inside or outside of the White house who has got the ultimate authority to look at the matter from the perspective of our national security and economic interests? Is that possible, or even feasible, or desirable, given the disaster that turned out with Homeland Security, where they tried to coordinate [inaudible 31:29] gathering and putting it under one agency, which turned out to be, I think, a failure and looking back on it historically. So that’s my question.
Patricia J. Paoletta: I’ll go first. That one executive is the Chief Executive, right? It’s the President. Because as John kind of mentioned, you have NEC, the National Economic Council, led by Larry Kudlow, who’s giving his economic perspectives on 5G policy, but you also have the national security advisor weighing in on some of the security issues. And they do often, as we know, have different takes on this, and on a range of issues, including on spectrum repurposing, and how much the government might lead on the RND, and how much we let the private sector do that. Obviously, Larry Kudlow’s been a big champion of letting the markets work and the private sector work to the extent possible.
So those two advisors to the President duke it out, and it’s the President who ultimately makes the decision. But on the unitary executive, on the FCC front, yeah, obviously there’s a longstanding debate in legal circles, including in The Federalist Society and some of the members on whether FTC, FCC, whether these independent agencies are even legal, right, or lawful or constitutional under our structure since -- if they’re executing policy, aren’t they supposed to be in the Executive Branch? But of course, Congress, who created these agencies, consider them to be operating under their delegated interstate commerce authority. So, yeah, nobody’s going to solve that in the near term, right? There might be some lawsuits that try to “T” those issues up.
At least, with respect to the FCC, this chairman has been no blushing, violet Mayfair on security policy. He has been fairly aggressive in terms of going along with trying to get Huawei equipment out of the network, and he’s already moved in his decision in late fall, in November, to rule that universal service contributions that come in from licensed operators in the U.S. that go to support more economically challenged areas. The carriers in those rural areas or low-income areas cannot use those subsidies to buy Chinese equipment, so he’s already moved on that.
And, in that order, where he made that decision, he referenced the National Defense Authorization Act, NDAA, 2019, which came out of, of course, the Senate and House Armed Services Committees where they said basically, “We don’t want any Huawei equipment in there. Everybody has to do what they can to cross the board and all the agencies to make sure we get Chinese equipment out of the network.”
So he’s implemented already a decision on that -- looking at that. So the lawfulness of an independent agency, like an FTC or FCC will remain, I think, an issue in legal circles for the foreseeable future. But, at least, the chairman on the FCC side has been doing his part in terms of trying to go along with the administration policy and trying to minimize Chinese influence and including on denying China mobile’s application and a bunch of other issues that he’s done.
On FTC, I’m going to have to defer to some of my colleagues on the call, but I suspect that this president will not be shy if the ultimate ruling was something that he viewed threatened the security of the United States. I obviously have no insight on that, but he’s certainly weighed in and done executive orders reversing some of the agency decisions when he felt it was in the security interest of the U.S. to do so.
Lawrence J. Spiwak: Well, just to sort of just jump in—and John probably can do this—when we talk about these other federal agencies, understand that NTIA is designed to handle basically the Executive Branch agencies to coordinate federal government spectrum use. It’s only for getting the unitary executive issue. The FCC is designed to handle commercial spectrum, but the big issue is that there’s a lot of federal spectrum users out there. DoD being the largest one, but the DOT is a huge user of spectrum. Noah is another really big one—weather service, that sort of thing. So having that all sort of within having all federal spectrum use administered by the Executive Branch is not, in my mind, a major constitutional problem here.
Dean Reuter: We do have another question from our audience. Let’s check in with our next caller.
Caller 2: I think you answered it about the Huawei concerns, but if anybody else wanted to comment.
Dean Reuter: Anyone want to weigh in further on Huawei versus the U.S.?
Hon. John Kneuer: I think what is happening is a potential shift in policy thinking about how to deal with Huawei. There is a widely shared perception that Huawei, as a company’s relationship with the Chinese government, presents a significant security concern. And the securities concern is two-levelled. The most direct level is that they would have to be responsive to Chinese government to request to infiltrate the network. And can we have confidence that the equipment is not comprised? So that’s the one sort of basic level of just because of the structure of and the relationship of Chinese industry with the Chinese government that that represents a threat.
The second threat comes from what Tricia was talking about in terms of the economic benefits they get, both in terms of indirect subsidies, and direct subsidies, and low-cost loans, such that all profitmaking ability is squeezed out of the telecommunications infrastructure space, and that there’s no room in the marketplace for non-Chinese manufacturers. Those western companies firms fail, and critical telecommunications infrastructure is sole-sourced in China or Asia at the very least.
So those are the issues that the government has been trying to deal with, and there has been a direct approach where the security agencies, in the U.S. government, simply tell U.S. companies “You can’t put Huawei equipment into your core network,” and then put pressure on our allied-trading partners to say “If you want to have a shared intelligence relationship with the United States government, you too cannot put Huawei into your network.” And that was sort of a blunt-forced tool to solve both of those problems.
It’s becoming untenable in particular with regards to our trading partners, where our trading partners are saying, “We can’t just keep Huawei out of the network. The cost advantages are too great. We can’t ask our carriers to pay more and pass things on, so what we’ll do—” what the U.K. did is they said, “We will allow no more than 30 percent of any network to be comprised of Huawei equipment.” And that creates a market space for western firms to enter into. I think there’s a sense that that too is unlikely to be sustainable in the long term.
So where the move is going is promoting what they call a virtual networks or open networks, where all of the intelligence of the network moves into the software layer, and the hardware, the equipment, that can become a cheap commodity, and nobody cares from a security standpoint. And also western firms are much more diverse and present much more competition in the software space. So that is introducing entirely new legal and regulatory regimes into this space, and it also introduces challenges.
There is great concern amongst many of the industry that ORAN, Open Radio Access Networks, they could introduce their own security challenges. They may not be ready for network-wide deployment. And, if the government is going to step in and start making network decisions, it’s going to do it badly. There are the flipsides of that. Let’s say, it’s the only path that we have. And I know Tricia has thought a lot about this, and Larry may have thoughts as well, and that’s a new intersection of the national security apparatus with the regulatory framework.
Patricia J. Paoletta: We’ve quite identified one of those leading issues where this is all coming to a head. If we do open networks, can we thereby help U.S. carriers and our allies—allies around the world—from becoming less reliant on Huawei. Because part of the issue too is when Huawei would sell a system, you do evolve and buy newer equipment that’s going to help you upgrade from 3G to 4G, 4G to 5G. You are stuck in that ecosystem. You are stuck with having to work with Huawei because of how it was all integrated into the hardware.
But as John said, part of the open radio access network movement is to – where if you virtualize some of those functions in the network, and you’re not just relying on the metal boxes that a lot of the functionality will be done through software, you’re freeing the operators for the next generation or adding new features to their services. They can actually go with a different firm’s software and get the same functionality but not relying on Huawei, including more secure features too.
There’s a lot of emphasis right now in the Trump Administration, and someone at the FCC, yesterday, they were going to have a virtualized radio access network workshop, but because of COVID, that was scuttled for the time being. So there is a focus on that to help on two fronts: free the operators from reliance on Huawei, which has been subsidized to the point where, right, the competitive western vendors, like Nokia, or Samsung, or Erickson, or others, were just too expensive.
But one point I do want to raise—and now I’m really tangential—but there has been a narrative, particular in Europe, where they’ve said, “Well, gosh, there are no other choices. We only had the cheap, subsidized Huawei,” or the other western vendors, I just mentioned, they’re too expensive. But there is a range of U.S. entities—Cisco, Mavenir, a lot of software guys—who are part of that broader ecosystem, so I guess part of my message is it’s not so dire that we don’t just have a handful of operators in the space, but because of that focus on open brand, right, the hope is that more and more U.S. competitive entities can get involved in that space and kind of free the operators from the clutches of Huawei or ZTE.
Dean Reuter: Larry, any comment on this?
Lawrence J. Spiwak: I think they both hit it. I don’t think people realize that when you build a network—and this is the problem that we’re talking about—is that it’s just not the network, but it’s all the back office and support system. And years ago, I was doing some work in Brazil, of all places, and we were saying, “Well, why doesn’t someone buy that network or that,—” “Because, well, that’s a Nortel network, and that’s a Lucid network, and the two don’t talk to each other.”
And so as the Chinese -- what they’re doing right now is going around, particularly, to develop worlds, going “Hey, you want a network? We’ll be glad to come in and bring you one. By the way, sign right here.” But they’re not hiring the locals. They’re just sending over tons of Chinese nationalists to build the network in Nigeria or something like that, so the locals are very upset about that. And it’s again another reason why we have the coronavirus.
This is a real problem, and I’ve got friends of mine in the administration, and they’re really waking up to this. They realize it’s going -- we can’t have the Chinese go in, and it’s kind of in a way almost a sea-like bubble from years ago, but except for it’s backed by the full faith and credit by the Chinese government, where the Chinese government is willing to give these very, very poor developing countries loans to go buy this stuff. It’s like, “Oh, sure, why not?” And then if they default, then the Chinese government just essentially takes over the network. But they’re also doing it for other critical infrastructure.
This is a real problem. This is not a new issue dealing with back doors at Huawei. And I guess it was about seven or eight years ago, one community in the House came up and flagged us for the first time, and I remember being asked to do Chinese television. And I was sort of nervous, like “What do I do about this?” U.S. carriers, particularly, the large ones, who have large government contracts, understand the duty to care. The last thing they want to do is put in the back door. And some of our carriers have been pretty good about this, but we are just one segment of the global internet, and the stuff that everybody’s talking about here. This is a real fundamental problem, so as we can move into that and break that logger jam, that’s a good thing.
Patricia J. Paoletta: And one other little point. Not only does Huawei have the Chinese Bank subsidizing its deployments overseas, they’re not quite as constrained by anti-corruption laws as some of the western vendors are. And the U.S. vendors, the Foreign Corrupt Practices Act, obviously, our vendors operate under that.
I attended the World Radio Conference late last year, and we were trying to convince some of the African countries to go our way, the U.S. position on a particular spectrum band, and arguing that this was really better for them, and don’t go with this Chinese argument, and why are you still relying on them anyway? And this particular African delegate said, “Well, you don’t build churches for us.” So it’s not just that they’re giving away cheap gear; they’re doing a lot of additional sweeteners to their offers. It’s a very pernicious and widespread problem, but this administration certainly is focused on trying to do what they can to turn that ship around.
Lawrence J. Spiwak: By the way, one quick that I forgot to mention, and you really don’t have to give Ajit Pai credit where credit is due. I guess it was a couple of months ago. I don’t have the exact time. But China Telecom. In order to provide service in the United States, you have to get what’s called a 214 certificate, which is basically on old common message of the ‘34 Communications Act. But basically, it gives you the authority to provide service in the United States. And by a 5-0 vote, that means the three Republicans and the two Democrats, and there’s s a lot of fighting on the Commission, but it was a unanimous vote. They voted to revoke China Telecom’s permission to provide service here.
A reporter called me up and asked me about this. And, look, I don’t know what information they saw, but the fact that, in these political times, if you got a 5-0 vote, that was a very serious thing that they had to do. Particularly, with just even the geopolitical implications for having a small agency saying, “No, China, you can’t provide China Telecom. You can’t provide service.” Again, it should get tremendous credit for stepping up to the plate on this.
Dean Reuter: Well, it looks like we’re out of audience questions. But we’re just about out of time as well, so let me give each of you a chance to express a final thought, maybe 30 seconds or so, in the order we had our opening remarks. John Kneuer, a final thought?
Hon. John Kneuer: To put all of this in context of where we are as a nation and what we’re experiencing right now, I think it’s also important to note that while 5G may be waived around as sort the magic answer to all things, the policies that have led to the robust investment in these networks, for more or less varying degrees bipartisan basis, we have had a pro-competition, pro-investment policy in this country. It led us through 1G, 2G, 3G, 4G. It’s a factor in the deployment of fiber and coaxial cables around the country, innovations in Wi-Fi, and unlicensed, and licensed spectrum, and we as a nation are reaping the benefits of those policy decisions right now.
Our economy has shifted almost entirely onto these networks; networks that are designed for varying amounts of throughput. So you don’t expect that every school child is not in school, instead at home trying to video conference all at the same time, while all of us are out of our offices and in our homes tele-networking, and the networks are standing up to the challenge, and we ought to take a moment to acknowledge that success and think about the policies that brought us there.
Patricia J. Paoletta: Well said, John. I probably only have a minute left, so I’ll be, even, perhaps more brief. While I certainly acknowledge that “the race to 5G” as a slogan has been overused and overhyped in the U.S. to push a particular proponent’s policy goals—it certainly has been done—or to perhaps cut some corners, as Larry noted, the U.S. is not alone in this focus on it because 5G has already -- since it’s begun to be deployed last year, globally, or certainly in some leading countries, like South Korea, certainly China and the U.S., to date it has been the fastest taken-up technology out there—the fastest G ever. We already have about 17 million subscriptions globally. And, again, the United Nations, the International Telecommunications Union, called this technology International Mobile Telecom 2020.
The goal originally, when this was first thought about, was to get this deployed in 2020, but already, because of its importance to countries around the world, it’s already been deployed by a number of countries well in advance of the original goal. So it’s not just the U.S. and some good lobbyists who have leveraged the President Trump’s interest in being first in everything, right?
This is a globally recognized technology that can bring a lot of societal benefits, particularly, in public safety and public health, and, of course, the COVID situation is showing how important those applications can be. So while, yes, it’s been very much leveraged, “winning the race to 5G,” this is a global phenomenon, and adoption is already well ahead of earlier generations of technology showing the importance countries ascribe to it in terms of its economic and societal benefits.
Dean Reuter: Larry Spiwak, you get the final word.
Lawrence J. Spiwak: Well, thanks, and I echo what both Trish and John have said. Particularly, in these difficult times, I think the amount of effort, whether you want to call it – whether the political motivating’s a slogan or not. But the effort over the last couple of years that we have been dedicating to 5G and to our networks, we are bearing the fruits of that labor now. And I think particularly in these difficult times, kudos have to go to the U.S. broadband on a wireless industry, and also kudos to the Commission, which has been doing Yeoman’s work.
Every day you read stories about people sharing spectrum in places where they needed to add capacity. Chairman, just today, opened up on the temporary basis the 5.9, which is still an open proceeding, just to get Wi-Fi out to rural areas. This is a shining moment, and I think this industry is one of our finest hours, and I’m very, very proud to be part of that. It’s just very nice to see that this community’s coming together—this industry to really help the nation in its very much time of need.
Dean Reuter: Thank you very much. So this is Dean again. Thanks to our guests, John Kneuer, Larry Spiwak, and Trish Paoletta. I certainly appreciate this. I think it’s been a very interesting discussion. But until the next call, we are adjourned.
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