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FCC cracks the whip on 5G deployment against protests of local governments
The FCC is pushing for speedy deployment of 5G networks nationwide with an order adopted today that streamlines what it perceives as a patchwork of obstacles, needless costs and contradictory regulations at the state level. But local governments say the federal agency is taking things too far.
5G networks will consist of thousands of wireless installations, smaller and more numerous than cell towers. This means that wireless companies can’t use existing facilities, for all of it at least, and will have to apply for access to lots of new buildings, utility poles and so on. It’s a lot of red tape, which of course impedes deployment.
To address this, the agency this morning voted 3 to 1 along party lines to adopt the order (PDF) entitled “Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment.” What it essentially does is exert FCC authority over state wireless regulators and subject them to a set of new rules superseding their own.
First the order aims to literally speed up deployment by standardizing new, shorter “shot clocks” for local governments to respond to applications. They’ll have 90 days for new locations and 60 days for existing ones — consistent with many existing municipal time frames but now to be enforced as a wider standard. This could be good, as the longer time limits were designed for consideration of larger, more expensive equipment.
On the other hand, some cities argue, it’s just not enough time — especially considering the increased volume they’ll be expected to process.
Cathy Murillo, mayor of Santa Barbara, writes in a submitted comment:
The proposed ‘shot clocks’ would unfairly and unreasonably reduce the time needed for proper application review in regard to safety, aesthetics, and other considerations. By cutting short the necessary review period, the proposals effectively shift oversight authority from the community and our elected officials to for-profit corporations for wireless equipment installations that can have significant health, safety, and aesthetic impacts when those companies have little, if any, interest to respect these concerns.
Next, and even less popular, is the FCC’s take on fees for applications and right-of-way paperwork. These fees currently vary widely, because as you might guess it is far more complicated and expensive — often by an order of magnitude or more — to approve and process an application for (not to mention install and maintain) an antenna on 5th Avenue in Manhattan than it is in outer Queens. These are, to a certain extent anyway, natural cost differences.
The order limits these fees to “a reasonable approximation of their costs for processing,” which the FCC estimated at about $500 for one application for up to five installations or facilities, $100 for additional facilities, and $270 per facility per year, all-inclusive.
For some places, to be sure, that may be perfectly reasonable. But as Catherine Pugh, mayor of Baltimore, put it in a letter (PDF) to the FCC protesting the proposed rules, it sure isn’t for her city:
An annual fee of $270 per attachment, as established in the above document, is unconscionable when the facility may yield profits, in some cases, many times that much in a given month. The public has invested and installed these assets [i.e. utility poles and other public infrastructure], not the industry. The industry does not own these assets; the public does. Under these circumstances, it is entirely reasonable that the public should be able to charge what it believes to be a fair price.
There’s no doubt that excessive fees can curtail deployment and it would be praiseworthy of the FCC to tackle that. But the governments they are hemming in don’t seem to appreciate being told what is reasonable and what isn’t.
“It comes down to this: three unelected officials on this dais are telling state and local leaders all across the country what they can and cannot do in their own backyards,” said FCC Commissioner Jessica Rosenworcel in a statement presented at the vote. “This is extraordinary federal overreach.”
New York City’s commissioner of information technology told Bloomberg that his office is “shocked” by the order, calling it “an unnecessary and unauthorized gift to the telecommunications industry and its lobbyists.”
The new rules may undermine deployment deals that already exist or are under development. After all, if you were a wireless company, would you still commit to paying $2,000 per facility when the feds just gave you a coupon for 80 percent off? And if you were a city looking at a budget shortfall of millions because of this, wouldn’t you look for a way around it?
Chairman Ajit Pai argued in a statement that “When you raise the cost of deploying wireless infrastructure, it is those who live in areas where the investment case is the most marginal—rural areas or lower-income urban areas—who are most at risk of losing out.”
But the basic market economics of this don’t seem to work out. Big cities cost more and are more profitable; rural areas cost less and are less profitable. Under the new rules, big cities and rural areas will cost the same, but the former will be even more profitable. Where would you focus your investments?
The FCC also unwisely attempts to take on the aesthetic considerations of installations. Cities have their own requirements for wireless infrastructure, such as how it’s painted, where it can be located and what size it can be when in this or that location. But the FCC seems (as it does so often these days) to want to accommodate the needs of wireless providers rather than the public.
Wireless companies complain that the rules are overly restrictive or subjective, and differ too greatly from one place to another. Municipalities contend that the restrictions are justified and, at any rate, their prerogative to design and enforce.
“Given these differing perspectives and the significant impact of aesthetic requirements on the ability to deploy infrastructure and provide service, we provide guidance on whether and in what circumstances aesthetic requirements violate the [Communications] Act,” the FCC’s order reads. In other words, wireless industry gripes about having to paint their antennas or not hang giant microwave arrays in parks are being federally codified.
“We conclude that aesthetics requirements are not preempted if they are (1) reasonable, (2) no more burdensome than those applied to other types of infrastructure deployments, and (3) published in advance,” the order continues. Does that sound kind of vague to you? Whether a city’s aesthetic requirement is “reasonable” is hardly the jurisdiction of a communications regulator.
For instance, Hudson, Ohio city manager Jane Howington writes in a comment on the order that the city has 40-foot limits on pole heights, to which the industry has already agreed, but which would be increased to 50 under the revisions proposed in the rule. Why should a federal authority be involved in something so clearly under local jurisdiction and expertise?
This isn’t just an annoyance. As with the net neutrality ruling, legal threats from states can present serious delays and costs.
“Every major state and municipal organization has expressed concern about how Washington is seeking to assert national control over local infrastructure choices and stripping local elected officials and the citizens they represent of a voice in the process,” said Rosenworcel. “I do not believe the law permits Washington to run roughshod over state and local authority like this and I worry the litigation that follows will only slow our 5G future.”
She also points out that the predicted cost savings of $2 billion — by telecoms, not the public — may be theorized to spur further wireless deployment, but there is no requirement for companies to use it for that, and in fact no company has said it will.
In other words, there’s every reason to believe that this order will sow discord among state and federal regulators, letting wireless companies save money and sticking cities with the bill. There’s certainly a need to harmonize regulations and incentivize wireless investment (especially outside city centers), but this doesn’t appear to be the way to go about it.
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Ericsson and T-Mobile ink $3.5 billion deal for 5G
New 5G networks are coming and big companies are spending big bucks to roll them out.
Ericsson is going to be providing T-Mobile with its latest 5G new radio hardware and 3GPP for a cool $3.5 billion.
As it moves from LTE Advanced networks to 5G, T-Mobile said it will use the Ericsson portfolio of products to expand its existing LTE capacity while readying the network for the 5G jump.
Included in the deal are Ericsson’s digital services like dynamic orchestration, business support systems and Ericsson cloud core, which will be used to help T-Mobile roll out 5G services to its customers.
“We have recently decided to increase our investments in the US to be closer to our leading customers and better support them with their accelerated 5G deployments; thereby bringing 5G to life for consumers and enterprises across the country,” Niklas Heuveldop, the president and head of Ericsson North America, said in a statement. “This agreement marks a major milestone for both companies. We are excited about our partnership with T-Mobile, supporting them to strengthen, expand and speed up the deployment of their nationwide 5G network.”
As Mobile World Congress Americas gears up there will be several of these announcements coming down the pike. Already Nokia and Sprint announced they’d be unveiling a demonstration of 5G new radio connections and the Nokia Massive MIMO (multiple input multiple output) technology.
New 5G networking technology promises to deliver high speeds and high-reliability, energy-efficient service in areas of high-device density with extremely low latency.
The partnership with Ericsson means that T-Mobile’s already installed base of Ericsson Radio System radios will be able to run 5G NR with a remote software installation.
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Apple’s 5G iPhone conundrum
Wednesday is Apple’s big product release day, where analysts expect the company to release the next edition of the iPhone. While the usual upgrades to the screen, CPU, and storage are expected as always, one major lingering question is how the company is going to handle 5G, the next-generation telecommunications standard.
The conventional wisdom among analysts is that Apple will ignore 5G in 2018 and 2019 just as it took extra time to rollout 3G and 4G chipsets in its phones. A typical example of this analysis comes from Chris Smith at BGR, who says that “We already saw what Apple did when 4G LTE came out. The company waited for carriers actually to offer decent coverage before launching the first 4G iPhone. That was the iPhone 5, by the way, which launched more than a year after the first Android-based LTE phones came out.”
I’m not nearly as convinced. There are many reasons for Apple to ignore the tech this year, which I will get to in a moment, but one major factor could drive an earlier discussion of 5G than expected: Apple’s growth markets, particularly in China.
China is becoming one of Apple’s most important markets for its smartphones, and particularly for its flagship iPhone X. Its greater China revenue in the third quarter of this year was $9.6 billion, and its operating income from the region was just shy of Europe’s. More importantly, greater China is just slightly behind the Americas as the fastest-growing region for Apple’s sales.
That makes 5G a particularly challenging issue for the company. China has made 5G leadership a critical pillar of its industrial strategy, and many analysts believe the country will set the pace for 5G rollouts globally. Furthermore, Chinese consumers are deeply interested in buying premium products and experiences, and adoption for 5G is expected to be strong and rapid.
With the technical specifications around the 5G standard complete, companies are racing to build the chipsets and deploy the infrastructure necessary to enable this new standard in smartphones and other devices. Early networks are expected to be deployed in 2019, and chipset maker Qualcomm has publicly unveiled more than a dozen handset manufacturers who are partnering with it on 5G. For instance, Vivo, a Chinese smartphone manufacturer, announced today that it was developing its first “pre-commercial 5G smartphones” for launch next year.
The speed and timing of the 5G rollout is awkward for Apple, which has traditionally timed its iPhone events for September. It almost certainly will make no announcements this week, but its next iPhone launch would likely be September 2019 — giving Chinese handset manufacturers with early 5G devices nearly exclusive access to the local market for the first three quarters of next year.
Apple would find itself falling behind its competitors in a fast-moving and critical growth market. While the company has built a brand in the country with devoted fans, its place in the market is not nearly as secure as in the U.S., particularly as the trade war between the two nations reaches a fevered pitch.
There’s no doubt that the challenges for Apple to include the technology are immense. First is the patent licensing cost, which Jeremy Horwitz at VentureBeat put at roughly $21 per device, up from around $9 for 4G. Second, the leading American company in 5G is believed to be Qualcomm, which Apple has been fighting in a long-running patent war, to the point that the company has been actively trying to remove Qualcomm equipment from its phones. Apple’s name was notably absent from Qualcomm’s 5G partner list.
While some early chip designs are available, they are hardly ready for primetime, and certainly not for a flagship phone like the iPhone X. Nor do I expect that Apple will imply on Wednesday that the company will support 5G in future releases and dampen enthusiasm for its newly-released devices. No one wants to be told that next year’s devices are going to be better than one released just minutes ago.
Instead, I expect Apple will use smoke signals to clearly demonstrate that it intends to remain at the cutting edge of 5G deployment. That could include joining certain industry trade groups, testing the technology in a more public fashion, and potentially releasing a roadmap next year, say at its Worldwide Developers Conference, which is traditionally held in June and thus earlier in the year than its September iPhone events.
What would be concerning though is if we get to the end of 2018 and into 2019 with nary a peep from the company about its plans for the technology. Given its commitment to China, as well as its leading position within the smartphone market, the company has to engage on the technologies around 5G in a public manner in order to prevent a loss in its competitive position.
Ultimately, much will depend on China Mobile and other telcos in China as well as around the world on how fast they can deploy 5G infrastructure (sadly, it looks increasingly like the U.S. faces a bumpy road in that direction). Beyond gold iPhone rumors, 5G may well be the first time that China drives the company’s product roadmaps, and it should be wary of finding itself on the defensive.
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Starry wants to put high-speed 5G internet in reach of everyone
Starry, a Boston startup, wants deliver high-speed 5G internet in major cities at a reasonable price. Today, it announced it is expanding service from its initial launch in Boston to New York City. The company also announced a deal with Related Companies, a large national affordable housing owner, to host Starry equipment on its buildings and offer Starry service to its tenants.
The Starry solution consists of three parts: The beam sits on a high roof. The point sits on a lower roof and the consumer gets a Starry Station, which acts as a modem of sorts to deliver the internet service to the home. As they put it, internet access becomes an extension of the property.
Diagram: Starry
While the hardware solution is impressive in itself, it allows Starry to offer high-speed internet to consumers at a more affordable price point than traditional large providers. Company founder and CEO Chet Kanojia says his company can provide up to 200 Megabits per second service, up and down, for just $50 a month with no data caps or long-term contracts. Installation is free and the company includes 24/7 customer care at no additional cost.
While it’s hard to compare pricing across services, Starry should appeal to cord cutters, who have dropped cable TV for more affordable streaming alternatives and have been looking for a way to free themselves from large internet service providers. It’s fair to say that no other provider offers this kind of speed up and down for that price.
The solution requires high rooftops to place the enabling infrastructure and the arrangement with Related is particularly interesting in this context. The deal is good for both parties, giving Starry the infrastructure it needs to place its equipment in major cities, while providing Related tenants with low-cost internet access starting later this year.
“Our first strategic partnership is with Related’s properties, which is a big property ownership company in all the major cities. It allows us to basically extend our network using their infrastructure, rooftops and buildings,” Kanojia said.
The startup plans to provide service to other New York City residents starting in parts of Manhattan and Brooklyn this fall, and expanding to other parts of the city over time. They also available in Washington and LA with 18 other cities coming on board in the next year.
The company launched in 2014 and spent a couple of years developing the hardware part of the solution. It has raised $163 million, according to data supplied by the company. The most recent round was $100 million Series C in July. It’s worth noting that their new partner, Related joined that most recent investment.
Kanojia helped launched Aereo, a startup that wanted to deliver low-cost television by placing antennas on rooftops and letting consumers view broadcast TV over the internet. That idea was shot down by the US Supreme Court when broadcasters sued for copyright violations, and the company went out of business soon after. Starry could be seen as an extension of that idea, but delivering internet instead of the TV signals themselves.
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UK sets out plan to spend billions on fiber and 5G broadband for all
The UK government has set out a package of measures it’s hoping will futureproof domestic networks and boost international competitiveness by supporting a nationwide rollout of full fiber broadband and 5G mobile technology.
The Future Telecoms Infrastructure Review, published today, follows the announcement of a market review last year as part of the government’s Industrial Strategy as it seeks to chart a technology-enabled course for growth and competitiveness.
Yet, at the same time, the UK seriously lags several European competitors on the fiber broadband front — so the strategy is also intended to try to reboot current poor performance.
The government says its telecoms plan emphasizes greater consumer choice and initiatives to promote quicker rollout — and an eventual full switch over — from copper to fiber.
It wants full fibre broadband to reach 15 million premises (up from the ’10M over the next decade’ set out in the Conservative party manifesto) by 2025, and also 5G mobile network coverage to reach the majority of the population.
By 2033, it wants full fiber broadband coverage to reach across all of the UK.
Currently the UK only has 4% full fiber connections, which compares dismally to 71% in Spain and 89% in Portugal. While France has around 28% — which the government notes is “increasing quickly”.
Included in the government’s strategy is public investment in full fiber for rural areas; and new legislation to guarantee full fiber connections in new build developments; as well as a series of regulatory reforms intended to drive investment and competition — which it says will be tailored to different local market conditions.
It’s also planning for an industry-led switch over from copper to full fiber — to avoid businesses being saddled with the expense and burden of running copper and fiber networks in parallel.
There’s no fixed timing for this, as the government says it will depend on the pace of fiber rollouts and take-up, but it suggests it’s “realistic to assume that switchover could happen in the majority of the country by 2030”.
To boost competition to drive commercial fiber rollouts, the government is proposing regulatory reform to allow for “unrestricted access” to Openreach ducts and poles — i.e. the wholly BT-owned company’s own physical infrastructure where fiber can be laid — for both residential and business broadband use, including for essential mobile infrastructure.
It also wants to open up other avenues for laying broadband fiber, saying other existing infrastructure (including pipes and sewers) owned by other utilities such as power, gas and water, should be “easy to access, and available for both fixed and mobile use”.
And it says it will shortly publish consultations on the proposed legislative changes to streamline wayleaves and mandate fiber connections in new builds.
Another key recommendation in the review, given that the expense of digs to lay fiber remains one of the biggest barriers to broadband upgrades, is for a new nationwide framework aimed at reducing the costs, time and disruption caused by street-works by standardising the approach across the country.
With its planned regulatory tweaks, the government reckons that market competition will be able to deliver full fiber networks across the majority of the UK (~80%) — leaving around ~20% which it’s expecting will require “bespoke solutions to ensure rollout of networks”. And for around half of that fifth it also expects taxpayer funding will be needed to deliver a fiber/5G upgrade.
It estimates that nationwide availability of ‘full fiber’ is likely to require additional (public) funding of around £3BN to £5BN to support commercial investment in the final ~10% of areas that would otherwise be overlooked — stressing that these “often rural areas must not be forced to wait until the rest of the country has connectivity before they can access gigabit-capable networks”.
So it’s planning to pursue an “outside-in” strategy, allowing network competition to serves commercially viable areas while laying down government support investment in parallel on what it describes as “the most difficult to reach areas”.
“We have already identified around £200M within the existing Superfast broadband programme that can further the delivery of full fibre networks immediately,” it notes on that.
Although it’s not clear at this stage how the government intends to fund the full proposals for a taxpayer-funded broadband bill running to multiple billions.
On the mobile connectivity front, it’s proposing increased access to spectrum for “innovative 5G services”, and says it will allow mobile network operators to make far greater use of government buildings to boost coverage across the UK.
“We should consider whether more flexible, shared spectrum models can maintain network competition between MNOs while also increasing access to spectrum to support new investment models, spurring innovation in industrial internet of things, wireless automation and robotics, and improving rural coverage,” it writes on that.
Over the longer term it says is expecting to see a more converged telecoms sector — so it’s leaving itself some ‘last mile’ wiggle room on the ‘full fiber’ push, for example by pointing out that: “Fixed fibre networks and 5G are complementary technologies, and 5G will require dense fibre networks. In some places, 5G may provide a more cost-effective way of providing ultra-fast connectivity to homes and businesses.”
“We want everyone in the UK to benefit from world-class connectivity no matter where they live, work or travel,” said the new Secretary of State for digital, culture, media and sport, Jeremy Wright, commenting on the review in a statement, and dubbing it a “radical new blueprint for the future of telecommunications in this country”.
“[The strategy] will increase competition and investment in full fiber broadband, create more commercial opportunities and make it easier and cheaper to roll out infrastructure for 5G,” he added.
The UK’s incumbent telco, BT, which owns and operates the country’s largest broadband network, has long pursued the opposite strategy to the one the government is here pursuing: i.e. by seeking to eke out its own ex-monopoly copper infrastructure, such as by applying technologies that speed up fiber to the cabinet technology, instead of making the major financial commitment to invest in substantially expanding full fiber to the home coverage (and thereby futureproof national network infrastructure).
For years competitors (and, indeed, frustrated consumers) have also accused the company of foot-dragging on providing access to its network — thereby undermining other commercial players’ ability to fund and build out next-gen network coverage.
Last year BT agreed with telecoms watchdog Ofcom to legally separate its network division Openreach — around a decade after a functional separation has been imposed by the regulator. Albeit, it’s still not the full structural separation some have called for.
“It is too early to determine whether legal separation will be sufficient to deliver positive changes on investment in full fibre infrastructure,” writes the government in its review, adding that it will “closely monitor legal separation, including Ofcom’s reports on the effectiveness of the new arrangements”.
“The Government will consider all additional measures if BT Group fails to deliver its commitments and regulatory obligations, and if Openreach does not deliver on its purpose of investing in ways that respond to the needs of its downstream customers,” it adds.
Commenting on the government’s strategy, an Openreach spokesperson told us: “We’re encouraged by the Government’s plan to promote competition, tackle red tape and bust the barriers to investment. As the national provider, we’re ambitious and want to build full fibre broadband to 10 million premises and beyond — so it’s vital that this becomes an attractive investment without creating digital inequality or a lack of choice for consumers and businesses across the country. As the Government acknowledges, the economics of building digital infrastructure remain challenging for everyone, and we believe a review of the current business rates regime is necessary to stimulate the whole sector.
“We’re already building full fibre to around 10,000 homes and businesses every week, and by 2020 we’ll have reached 3 million,” the spokesperson added. “We have a huge, world class engineering team and wherever we build, we’ll deliver the best quality network with the highest levels of service and built-in competition and choice.”
One aspect of the strategy the government is not trumpeting quite so loudly in its PR around the announcement is an intent to promote what it describes as “stable and long-term regulation” as part of its strategy to drive increased competition and unlock business investments.
On this it writes that the overarching strategic priority to “promote efficient competition and investment in world-class digital networks” should be “prioritised over interventions to further reduce retail prices in the near term, recognising these longer-term benefits”.
In the review it suggests moving to longer, five year review periods, for instance — saying this “could provide greater regulatory stability and promote investment”. It also writes that it wants Ofcom to publish guidance that “clearly sets out the approach and information it will use in determining a ‘fair bet’ return”.
It’s therefore possible that UK consumers could end up paying twice over to help fund national fiber broadband infrastructure upgrades; i.e. not just via direct subsidies to fund rural rollouts but also, potentially, via higher broadband prices too. Albeit, the government says that in its view “the interests of consumers are safeguarded as fiber markets become more competitive”.
Though in less commercially attractive areas, where there could be a greater risk of price inflation, the government’s small print does include the recognition that regulatory interventions — such as price controls — may indeed be required. Though of course any such controls would only come in after consumers had been being stung…
“For areas where there is actual or prospective effective competition between networks, Government would not anticipate the need for regulation,” it writes. “For other areas, we would expect the regulatory model for to evolve over time as networks are established. If market power emerges, regulated access (including price controls) may be needed to address competition concerns. These detailed regulatory decisions will be for Ofcom to take.”
This report was updated with comment from Openreach
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How backups, backups, backups protect NYC’s cellular infrastructure
The infrastructure that underpins our lives is not something we ever want to think about. Nothing good has come from suddenly needing to wonder “where does my water come from?” or “how does electricity connect into my home?” That pondering gets even more intense when we talk about cellular infrastructure, where a single dropped call or a choppy YouTube video can cause an expletive-laden tirade.
Recently, I visited Verizon’s cellular switch for the New York City metro area (disclosure: TechCrunch is owned by Oath, and Oath is part of Verizon). It’s a completely nondescript building in a nondescript suburb north of the city, so nondescript that it took Verizon’s representative about 15 minutes of circling around just to find it (frankly, the best security through obscurity I have seen in some time).
This switch, along with its sister, powers all cellular service in New York City, including three million voice or voice over LTE (VoLTE) calls and 708 million data connections a day. High-reliability and redundancy is a must for the facility, where dropping even one in 100,000 connections would create more than 7,000 angry customers a day. As Christine Williams, the senior operations manager who oversees the facility, explained, “It doesn’t matter what percentage of dropped calls you have if you are that person.”
As we walked through the server rows that processed those hundreds of millions of connections, I was surprised by just how little digital equipment was actually in the switch itself. “Software-defined networking” has taken full hold here, according to Michele White, who is Verizon’s Executive Director for Network Assurance in the U.S. northeast. As the team has replaced older equipment, the actual physical footprint has continued to downsize, even today. All of New York City’s traffic is run from a handful of feet of server racks.
The key to network assurance is two-fold. First is multiple levels of redundancy at every level of the infrastructure. Inside the switch, independent server racks can take over from other servers that fail, providing redundancy at the machine level. If the air conditioning — which is critical for machine performance — were to fail, mobile AC units can be deployed to pick up the burden.
All equipment in the building is serviced by DC power, and in the event of an external power loss, two diesel generators connected to a large fuel storage tank will take over. The facility is also equipped with battery backups that can sustain the facility for eight hours if the generators themselves don’t function appropriately.
Diesel generators can sustain power to the switch in the event of an external power outage
At a higher level, the switch and its sister share all New York City cellular traffic, but either one could handle the full load if necessary. In short, the goal of the switch’s design is to ensure that that no matter how small or large a problem it might experience, there is an instant backup ready to go to keep those cellular connections alive.
The other half of network assurance is centralization, something that I was surprised to hear in this supposed era of decentralization. Cellular sites in an urban area like New York are often placed on buildings, as anyone looking at roof lines can see from the street. Given those locations, it can be hard to provide backup generators and other failover infrastructure, and servicing them can also be challenging. With centralization, increasingly only the antenna is located at the site, with almost all other operations handled in central control offices and switches where Verizon has greater control of the environment.
Even with intense focus on redundancy, natural disasters can overwhelm even the best laid plans. The telecom company has an additional layer of redundancy with its mobile units, which are placed in a “barnyard” owing to the names of the equipment stored there. There are GOATs (generator on a truck), and COWs (cell on wheels), and BATs (bi-directional amplifier on a truck). These units get deployed to areas of the network that either are experiencing unusually strong demand (think the U.S. Open or a presidential inauguration) or where a natural disaster has stuck (like Hurricane Harvey).
A barnyard filled with animal-named mobile cell infrastructure, including COWs, COLTs, HORSEs, and others
That said, both White and Williams noted that mobile cell deployment is much rarer than people would guess. One reason is that cell sites are increasingly being installed with Remote Electrical Tilt, which allows nearby cell sites to adjust their antennas so as to provide some signal to an area formerly covered by an out-of-commission cell. That process I was told is increasingly automated, allowing the network to essentially self-heal itself in emergencies.
The other reason their deployment is rare is that network assurance already has to handle a remarkable amount of surging traffic throughout the normal ebb and flow of a dense urban city. “Rush hour in Times Square is pretty heavy,” noted Williams. Even something as heavy as a parade through Midtown Manhattan won’t typically exceed the network’s surge capacity.
One other redundancy that Verizon has been exploring is using drones to provide more adaptive coverage. The company has been testing “femto-cell” drone aircraft designed by American Aerospace Technologies that can provide one square mile of coverage for about sixteen hours. A drone capability could be particularly useful in cases like hurricanes, where roads are often littered with debris, making it hard for network engineers to deploy ground-based mobile cells.
I asked about 5G, which I have been covering more heavily this year as telecom deployments pick up. Given the current design of 5G, White and Williams didn’t expect too much change to happen at the switch level, where most of the core technology was likely to remain unchanged.
The trend that is changing things though is edge computing, which is in vogue due to the need for computing to be located closer to users to power applications like virtual reality and autonomous cars. That’s critical, because 50 milliseconds of extra latency could be the difference between an autonomous car hitting another vehicle or a new support pylon and swerving out of the way just in time.
Edge computing in many ways is decentralizing, and therefore there is a tension with the increasingly centralized nature of mobile communications infrastructure. Switches like this one are getting outfitted with edge technology, and more installations are expected in the coming years. 5G and edge are also deeply connected at the antenna level, and that will likely affect cell deployments far more than the switch infrastructure itself.
Edge, internet of things, 5G — all will increase the quantity and scale of the connections flowing through these networks. In the future, a cellular outage may not just inconvenience that YouTube user, but could also prevent an automobile from successfully navigating to a hospital during a natural disaster. It takes backups, backups, and backups to prevent us from ever having to ask, “where does that signal come from?”
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Cisco buys July Systems to bring digital experience to the real world
Customer experience management is about getting to know your customer’s preferences in an online context, but pulling that information into the real world often proves a major challenge for organizations. This results in a huge disconnect when a customer walks into a physical store. This morning, Cisco announced it has bought July Systems, a company that purports to solve that problem.
The companies did not share the acquisition price.
July Systems connects to a building’s WiFi system to understand the customer who just walked in the door, how many times they have shopped at this retailer, their loyalty point score and so forth. This gives the vendor the same kind of understanding about that customer offline as they are used to getting online.
It’s an interesting acquisition for Cisco, taking advantage of some of its strengths as a networking company, given the WiFi component, but also moving in the direction of providing more specific customer experience services.
“Enterprises have an opportunity to take advantage of their in-building Wi-Fi for a broad range of indoor location services. In addition to providing seamless connectivity, Wi-Fi can help enterprises glean deep visitor behavior insights, associate these learnings with their enterprise systems, and drive better customer and employee experiences,” Cisco’s Rob Salvagno wrote in a blog post announcing the acquisition.
As is often the case with these kinds of purchases, the two companies are not strangers. In fact, July Systems lists Cisco as a partner prominently on the company website (along with AWS). Customers include an interesting variety from Intercontinental Hotels Group to the New York Yankees baseball team.
Ray Wang, founder and principal analyst at Constellation Research says the acquisition is also about taking advantage of 5G. “July Systems gives Cisco the ability to expand its localization and customer experience management (CXM) capabilities pre-5g and post-5g. The WiFi analytics improve CXM, but more importantly Cisco also gains a robust developer community,” Wang told TechCrunch.
According to reports, the company had over $67 billion in cash as of February. That leaves plenty of money to make investments like this one and the company hasn’t been shy about using their cash horde to buy companies as they try to transform from a pure hardware company to one built on services
In fact, they have made 211 acquisitions over the years, according to data on Crunchbase. In recent years they have made some eye-popping ones like plucking AppDynamics for $3.7 billion just before it was going to IPO in 2017 or grabbing Jasper for $1.4 billion in 2016, but the company has also made a host of smaller ones like today’s announcement.
July Systems was founded back in 2001 and raised almost $60 million from a variety of investors including Sequoia Capital, Intel Capital, CRV and Motorola Solutions. Salvagno indicated the July Systems group will become incorporated into Cisco’s enterprise networking group. The deal is expected to be finalized in the first quarter of fiscal 2019.
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Europe to cap intra-EU call fees as part of overhaul to telecoms rules
European Union institutions have reached a political agreement over an update to the bloc’s telecoms rules that’s rattled the cages of incumbent telcos.
Agreement was secured late yesterday after months of negotiations between the EU parliament and Council, with the former pushing for and securing a price cap on international calls within the bloc — of no more than 19 cents per minute. Texts will also be capped at a maximum of 6 cents each, Reuters reports.
While roaming charges for EU travelers were abolished across the bloc last summer, the parliament was concerned that charges for calls and texts between EU Member States is often disproportionately high — hence pushing for the cap, which was not in the original EC proposal.
The Commission proposed a new European Electronic Communications Code back in 2016, to modernize telecoms rules that had stood since 2009 — to take account of technology and market shifts, and align the rules with its wider Digital Single Market strategy.
The proposal broadly focused on pushing for consistency in spectrum policy and management; reducing regulatory fragmentation; ensuring a level playing field for market players and protections for consumers; and incentivizing investment in high-speed broadband networks.
And on the incentivization front, the new rules agreed yesterday update the powers of national regulators to act against dominant players — such as by being able to impose access to their network.
For a case study on why such interventions might be necessary you could look at the fiber investment and network-access foot-dragging of a former incumbent telco such as BT in the UK, for example, which has long favored eking out copper. While its network infrastructure division OpenReach was last year ordered to be legally separated — around a decade after it was functionally separated by the regulator. Yet complaints over BT’s lack of investment in broadband infrastructure and access for rivals to its networks have, nonetheless, persisted.
On the consumer front, the new EU telecoms Code also includes measures intended to make it easier to change service provider and keep the same phone number; measures around tariff transparency to make it easier for people to compare contractual offers, and the ability to terminate a contract without incurring additional costs; as well as additional protections around bundled services.
For operators there are deregulation measures for co-investments — intended to promote “risk sharing in the deployment of very high capacity networks”. And the Code sets wireless spectrum licenses at at least 20 years — also intended to give carriers the “predictability” they need to speed up 5G and fiber deployments.
Though this is shorter than operators had hoped, and the European Telecommunications Network Operators’ Association (ETNO) — whose membership is made up of incumbent telcos such as BT — has been quick to voice its displeasure, describing the code as a “missed opportunity“, and complaining that it adds extra complexity while also failing to incentivize investment.
“The Code will not ignite the much needed rush to invest in 5G and fibre networks and it will add complexity to an already burdensome system,” it writes. “The agreed law foresees only limited progress on spectrum policy, a complex and watered down compromise on incentivising fibre investment, uncertain triggers for imposing regulatory remedies and no fair playing field for digital services users and providers.”
Smaller, fiber-to-the-home broadband players are sounding much happier though…
The FTTH Council Europe congratulates the co-legislators for reaching today’s agreement on the #EECC and welcomes the regulatory push to #fibre investments & end-user benefits. More info: https://t.co/azx0VW8R6q pic.twitter.com/gCLk2pNKZr
— FTTH Council Europe (@FTTHCouncilEU) June 6, 2018
Congratulations for the results of the new telecom code. The wholesale only model will boost investments in FTTH in Europe. No more conflicts of interest of incumbents @delcastillop @GabrielMariya @ViolaRoberto
— Luigi Gambardella (@lgambardella) June 6, 2018
ETNO also criticizes what it describes as “the unfortunate decision to regulate intra-EU calls” — arguing this is an unjustified, populist measure, and sniping that it creates legal uncertainty by setting what it couches as “a highly dangerous precedent for all other European industries”.
That’s not the view of the European Consumer Organization, BEUC, which describes the measure as “a good next step towards a real single market for consumers”.
“Consumers should no longer have to worry about excessive costs when calling another EU country from home. The end of roaming charges was a big first step, but it did not deal with the high costs of phone calls to another EU country when at home,” its director general, Monique Goyens, told us in a statement.
“Market concentration is bad for prices and consumer choice. A small group of players should not be able to take control of the market. Thanks to what has been agreed, national regulators can take measures to intervene and maintain a healthy level of competition,” she added.
“Telecom services regularly rank among the top most complained-about markets. This new law upgrades some important consumer protection measures. Telecom clients will for instance be able to end their contract early and choose a better deal.”
And of course the Commission is putting a positive spin on the outcome, two years on from its proposal to modernize the rules.
In a statement welcoming the end of the negotiations, Andrus Ansip, the VP in charge of the Digital Single Market, said: “This agreement is essential to meet Europeans’ growing connectivity needs and boost Europe’s competitiveness. We are laying the groundwork for the deployment of 5G across Europe.”
In another supporting statement, Mariya Gabriel, commissioner for digital economy and society, described the new rules as “bold and balanced” — saying they would provide “faster access to radio spectrum, better services and more protection for consumers, as well as greater investment in very high speed networks”.
While political accord on the new telecoms code has indeed been reached between the EU institutions, members of the EU parliament and Council still need to vote to adopt it — after which the bloc’s Member States will have two years to transpose it into their national laws.
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The 5G wireless revolution will come, if your city council doesn’t block it first
The excitement around 5G is palpable at the Brooklyn 5G Summit this week, and for good reason. Once the province of academic engineers, there is increasingly a consensus emerging among technology leaders that millimeter-wave technology is ready for prime time.
Yet there remain large barriers to a successful rollout, particularly at the local government level. Those challenges could prevent the U.S. from aggressively competing with other nations like China, which are investing massive resources to lead this next generation of wireless technology.
The Summit, now in its fifth year and organized by New York University’s Wireless Center, Nokia and IEEE, is designed to showcase New York’s technology leadership in the space. New York has been at the forefront of wireless for many years, with the first mobile phone call taking place in Midtown Manhattan.
That was 45 years ago though. This month, New York learned that it had been selected as one of two initial sites for a 5G testbed by the Platforms for Advanced Wireless Research program, which is managed by the National Science Foundation in concert with a consortium of wireless companies.
Through a program called COSMOS, researchers will deploy a total of 249 large, medium and mostly small cell nodes to West Harlem (including Columbia University’s Morningside Heights main campus) in order to investigate the performance of 5G in an urban setting. New York was awarded an initial grant of $3.6 million to execute the initiative.
This sort of testbed model is quite progressive in the wireless industry. While the notion of a minimum viable product and constant test feedback is a hallmark of software startups, that mentality has not been translated well into the wireless world. The hope for this testbed is that as new equipment is invented in the coming years, the West Harlem network can be continuously upgraded, serving as a model for potential deployments onto operators’ networks across the country.
It’s also critical because the network architecture of wireless is expected to change drastically in the years ahead. More computing will be done at the “edge” in order to reduce network latency and power the internet of things. In order to handle that traffic, new machine learning algorithms are going to have to be deployed that can actively manage traffic and ensure that applications have reliable performance. A realistic testbed provides key training data and analytics that can improve those algorithms and ultimately deliver better services to customers.
The good news is that the U.S. has conceived and launched this test program. The bad news is that we may still be too slow to win the competition for this generation of wireless tech.
The wireless industry’s trade association, the CTIA, has declared the rollout of 5G a “race” between the United States and the Asian nations of China, Korea and Japan. The U.S. widely won the competition for 4G technologies, but the rise of Huawei as a dominant force in the wireless equipment space means that competition for technological leadership has never been more keen.
The White House and the federal government have made a 5G rollout a national security priority, but getting 5G wireless into the hands of consumers is likely to be stymied by opposition from local city councils and mayors around the issue of site access.
In order to provide reliable cell service, operators need to deploy cell sites near consumers. While they don’t need direct line of sight for the spectrum used in 4G, buildings and other objects can interfere with signals, making it critical to have a dense mesh of sites in urban environments.
Concerns about cancer, historical preservation and fees for renting space have slowed the expansion of wireless services to communities across the country. Permits for erecting a new cell site can easily take a year or more.
In the 4G world, that was somewhat manageable, since the network architecture was built with large cell sites as the core of the network. With 5G though, technologists are pushing for greater decentralization through deployment of microcells that would be closer to street-level, improving quality of service while lowering power requirements. The fear is that if permits continue to take so long for every new site, the burden of that process could kill 5G in the United States.
The FCC is investigating how to reduce the burden of siting requirements, and one option is to exempt from review the kinds of small cells that are at the heart of 5G. That plan though has faced significant pushback from environmental and historical preservation activists, who don’t want the federal government overruling local government decisions on wireless rollouts.
One attendee of the Summit this morning joked that “It takes 18 months to review a permit, and one hour to install” a small cell. Others noted that it takes just a few short weeks to deploy cell sites in South Korea and China, one reason those countries are in many ways leading the race for 5G.
As with any summit, there were buzzwords galore, but the reality is that the U.S. has an incredible opportunity to win this critical space. But we will need to fight in jurisdictions across the country if we ever want to see this technology actually arrive in our hands.
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Qualcomm’s war may be over, but the casualties are just starting to be calculated
The epic battle between Qualcomm and Broadcom seems to have reached its armistice, with President Trump using the power of CFIUS to block the transaction this past week, ending what would have been the largest tech M&A transaction of all time.
It may be all quiet on the semiconductor front, but Qualcomm and Broadcom will now need to find a path forward to win the peace and secure access to the coming 5G wireless market. Qualcomm faces a daunting number of challenges, including a potential takeover battle waged by the spurned son of its founder. Broadcom will have to find a new path to use acquisitions to continue its growth.
As with any war though, the damage from this conflict isn’t exclusive to the two enemy combatants. The future of corporate governance and shareholder autonomy is now being reevaluated in light of the actions used by Qualcomm in its defense against Broadcom’s hostile takeover. In addition, America’s openness to foreign investment is increasingly under scrutiny.
Qualcomm picks up the pieces
Hostile takeovers are always going to be damaging affairs, no matter the outcome. The most important mandate for any board of directors — and particularly for the boards of technology companies — is to identify long-term threats and opportunities facing a company, and guide the executive team toward the best possible outcome for shareholders. Hostile takeovers are firefighting affairs — the discussions of the board are jolted from roadmaps, strategy, and vision to the minute-by-minute tactics of defending the company from marauding invaders.
Qualcomm should be directing its attention to strategy, but it faces additional wars on nearly every front. It’s fighting shareholders for its future, fighting Apple and Huawei over its revenues, fighting China over its acquisition of NXP, and now potentially fighting its founder’s son from a private takeover attempt.
Many of Qualcomm’s shareholders see the company’s performance as disappointing. While its stock has fluctuated over the past six years, today’s share price is essentially flat from where it stood in January of 2012. Compare that to Broadcom, which in the same timeframe has seen an increase of about 740%, and the PHLX Semiconductor Sector index, a basket index of the industry, which has seen its value increase by about 280%.
Unsurprisingly, shareholders were enticed by the opportunity to suddenly realize a 35% premium on their shares with Broadcom’s $82-a-share offer. Unlike Qualcomm’s board, shareholders were very interested in accepting Broadcom’s offer. In fact, we now know that Qualcomm’s board knew that it has lost the battle against Broadcom with its own shareholders during the acquisition process. As Bloomberg reported this week:
The votes started to come in on Friday, March 2. By Sunday it was clear that Qualcomm’s defense had failed.
Four of the six directors Broadcom had nominated were polling so far ahead of their Qualcomm peers that the race was effectively over, according to data viewed by Bloomberg. The remaining two were winning by less substantial margins. Making it worse, Mollenkopf and Jacobs, the architects of Qualcomm’s standalone plan, had received some of the fewest votes.
Inside the Qualcomm camp, the mood was bleak; assuming the trend continued, the board would lose control of the company at the shareholder meeting.
Broadcom’s message was one of quiet confidence. The company knew it had won, one person close to the discussions said. At that point, the person said, it was just a question of by how many votes, and who was going to leave the board.
Broadcom was winning the battle with shareholders, so Qualcomm’s board shifted to a terrain far more favorable to it: Washington bureaucrats. From the same Bloomberg report, “Federal lobbying disclosures for 2017 showing that Qualcomm spent $8.3 million, or roughly 100 times the $85,000 Broadcom spent…” These weren’t regulators; these were friends.
In late January, Qualcomm’s board submitted a preliminary, voluntary, and confidential notice to CFIUS asking for a review of Broadcom’s potential board coup. When Broadcom attempted to redomicile to the United States to avoid CFIUS purview (as it would no longer be a foreign company but a domestic one after it redomiciled), the government’s anger was palpable and sealed the company’s fate. The board’s original outreach to CFIUS precipitated the sequence of events that led to Trump’s block this past week.
Qualcomm’s board won the war, but it is still facing a rebellion from its own bosses. The board will be up for election unopposed this week at the company’s delayed shareholders meeting. Perhaps taking a page from tomorrow’s Russian presidential election, some shareholders are withholding their votes from the board slate to show their displeasure with the entire saga. From the Wall Street journal, “Institutional Shareholder Services Inc., an influential proxy-advisory firm, … in a note to investors late Wednesday, stood by its original recommendation that shareholders vote for four Broadcom nominees for Qualcomm’s 11-person board, even though the votes won’t count.”
That shareholder meeting will no doubt be eventful. While the board and the company’s execs will argue that they have a strategy moving forward, they confront two other ongoing firefighting challenges and one new one that could be another round of bruising internecine warfare.
Qualcomm is still in the midst of its $44 billion NXP acquisition, which continues to wait on Chinese regulatory approval. The timeline for that approval is still unclear, but even when Qualcomm does receive it, the company will still have to close the deal and actually implement the transaction. That will take significant time and energy.
Even more complicated is the continuing fight with Apple and Huawei over Qualcomm’s IP licensing revenue. Licensing revenue is crucial for Qualcomm, and the litigation around the fight will force the board to continue monitoring the day-to-day legal tactics of the company rather than focus on a longer-term vision of how to work with the largest smartphone producer in the world to generate profits.
On top of those two challenges, another takeover attempt could potentially exhaust the board further. Yesterday, Qualcomm’s board voted to remove board member Paul Jacobs, who is the son of Qualcomm’s founder and the company’s former chief executive from 2005 to 2014. He had been demoted from executive chairman to director just last week. As the New York Times noted, “The split, which means no member of the Jacobs family will be involved at the top echelons of Qualcomm for the first time in 33 years, was not friendly.”
According to reports, Jacobs is attempting to raise more than $100 billion to buy the company, potentially leveraging SoftBank’s Vision Fund in the process. SoftBank, of course, is a Japanese company, and the Vision Fund has significant capital from foreign countries including Saudi Arabia and the United Arab Emirates. Even more ironically, Qualcomm is an investor in the Vision Fund.
Jacobs is following in the footsteps of Michael Dell who bought the eponymous tech company back in 2013 in a take-private transaction worth $24 billion. Can Jacobs even raise the required amount of capital, four times more than Dell? Will Qualcomm be forced to run back to the Trump administration in order to avoid a “foreign” takeover of the firm yet again, this time by the son of the company’s founder?
My guess — fairly weakly held — is that the answers are yes and no. Jacobs will find the money, and the board won’t fight a distinguished former executive — even if Jacobs was running seriously behind in shareholder approval in the Broadcom fight. We will learn more in the coming weeks, but expect more strategic actions here (maybe from Intel) as well.
Broadcom regroups
Despite its very public failure, Broadcom is in a much stronger position coming out of this battle. It beat analyst estimates this week for its Q1 earnings, and has seen impressive growth in its wireless communications segment, which were up 88% year-over-year. It also managed to lower expenses, which helped drive an increase in gross margin to 64.8% (aren’t fabless and patents awesome?)
Broadcom continues to deliver strong results, but the big question post-Qualcomm is really what’s next? Qualcomm was the single most important chip company that might have been available for purchase (Intel is out of Broadcom’s league). While it plans to continue to redomicile to the U.S., which should allow it to get back into the acquisition game in America, Broadcom may struggle in the coming years to find the kinds of accretive acquisitions that can keep its growth on the trajectory it has been on over the past few years.
Shareholder power wanes?
The biggest questions coming out of the Qualcomm / Broadcom spat is not related to the companies themselves, but the entire intellectual edifice of shareholder rights and the framework used by American companies to conduct corporate governance.
Qualcomm’s board of directors took extraordinary steps to block the Broadcom acquisition. They unilaterally went to Washington to get an injunction not on a deal — which had never been consummated between the two companies — but to block Broadcom from replacing its board of directors in a standard shareholder vote. This is a very important distinction: Qualcomm’s board saw the direction shareholders wanted to go, and essentially decided to just ignore the election process entirely.
From Dealpolitik columnist Ronald Barusch:
This change threatens over three decades of a carefully balanced governance system. Since the Delaware Supreme Court approved the use of the poison-pill takeover defense in 1985, the courts have basically blessed the following tradeoff: On the one hand, corporate directors can fight tooth and nail to stop a deal and the courts will give only limited scrutiny to defensive tactics.
However, the board is strictly limited in any moves to interfere with shareholders’ ability to replace directors and force a company to change course that way. In the vernacular of a leading Delaware case, a “just say no” defense doesn’t mean “just say never.” A bidder with enough patience who can convince a target’s shareholders to change directors has a path at least toward cooperation on resolving regulatory impediments to a deal.
This is a unique case as Barusch notes, but at what point can boards use every method at their disposal to prevent their own shareholders — the people they have a fiduciary duty to represent — from taking charge of the company? This past week presents one of the most complex examples to date, and it wouldn’t surprise me if a shareholder decides to attempt a legal attack on Qualcomm.
The other side of the potential waning of power for shareholders is CFIUS itself. The Trump administration ended a potential deal for a company that shareholders were widely in favor of. Where do the rights of shareholders to realize a return on their equity end and the right of America as a nation to control national security technology start?
We are on new terrain, and there are no clear answers here. In many ways, it depends on what happens over the next few years of the Trump administration. If there are more blocks like what we saw this week, we could see a radical change in the corporate calculus that would have a long-term negative effect on the value of some American companies.
Hostile takeovers may be incredible drama for writers like yours truly, but they have enormous consequences for companies and the employees who work at them. Qualcomm is going to have to shore up its support with a whole host of stakeholders in the coming months (while dealing with a potential take-private fight), while Broadcom needs to find its next strategy for further growth. All of us are going to have to deal with new uncertainty around the power of shareholders to shape the destiny of their companies. The war is over, but the aftermath and its consequences have just begun.
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