Scott Wallsten: Hi and welcome back to TPI’s podcast, Two Think Minimum. I’m TPI president and senior fellow Scott Wallsten. It’s Friday, December 13th, 2019. We have with us today, Jonathan Make, who is executive editor of Communications Daily and telecom reporter extraordinaire, having spent the last 16 years, at least, covering the industry. And as always, I’m joined by my colleague, the inestimable TPI senior fellow Sarah Oh. As it’s nearing the end of the year, we thought that today we’d look back at some of the year’s biggest telecom stories and then look forward to what we might expect in 2020. Jonathan, thanks for joining us.
Jonathan Make: I did not realize until today that it was Friday the 13th.
Scott Wallsten: Yes, auspicious.
Jonathan Make: It’s definitely auspicious. Thanks for having me, and I think there’s a lot of stuff to talk about from the last year in telecommunications and related fields.
Scott Wallsten: What would you like to start with?
Jonathan Make: Well, I was hoping we could start by talking about Julius Knapp. He’s retiring in a couple of weeks from the FCC, which is just next door. He has been very widely recognized as the example number one in public servants who are non-political career civil servants working on technical issues who are there for the long term. Not only is it, I’m sure, a loss to the FCC with all of his technical and policy expertise, but it also kind of highlights the whole unsung army of, some people call them bureaucrats, here in Washington that are doing the daily work and the recognition that he has received in the last couple of weeks since announcing his retirement has been extraordinary and I would compare it to when the chairman of a major agency leaves or comes. It’s been that extensive and I think that really speaks volumes to perhaps the time we’re in that is a bit partisan and where some of the people in these positions might tend to be at times more political and also to the brain drain that, just this and next month the FCC will experience final point. There were easily a dozen, maybe closer to 20 people whose retirements were announced at the FCC meeting, just next door, just yesterday. I would think their average tenure was 30 years, so that’s hundreds of years of bureau and office staffers from all realms of policymaking and technical support. The people who show you how to submit your filings, the people who probably help run the auctions, run the media bureau, all of these people are retiring. That’s significant.
Sarah Oh: Could you describe a little bit more about the impact that Julius Knapp has had? I assume he’s been working there almost 30 years and that is far more than any chairman stays at the FCC. Could you explain little bit more the kind of impact one person can have at the FCC?
Jonathan Make: I actually think he has been there closer to 50 years and that he has well exceeded the time when he would be able to retire perhaps with maximum benefits. He was recalling yesterday, which was his last monthly FCC meeting that the first item he delivered to commissioners at a meeting was in the 1980s, I would assume that early 1980s, on portable phones and that that was cutting edge at the time and then he was recalling in 19, I believe 1999, so 20 years ago, when he was presenting on I believe wifi and or on car safety technology. Now, in fact the item or items that he was discussing yesterday have to do with using new swaths or swaths of spectrum that have not been very extensively commercially used, some of which have federal users, perhaps military, all sorts of uses and trying to free these up sometimes for licensed spectrum where the FCC might auction it as we’ve seen for billions or tens of billions of dollars or in other cases will make available certain parts of it on a sharing basis with other users or will use it for things like wifi. And this kind of brought full circle how we’ve seen the flourishing just in this last 20 years of wifi. So it’s probably more about just a couple things he’s done, but he is very well known within technical circles, certainly throughout the country, and probably throughout other countries with systems like ours, as an expert on spectrum and all of the iterations that happen with it. And again, he’s just one person.
Scott Wallsten: You’ve given us a great segue into some more of the actual substance at the FCC has done this here, but I want to derail that to continue talking about Julius for a second because he was, like you said, he was really amazing and everybody respected him regardless of political party. Every chairperson knew his opinion was unbiased and rigorous and like you said, he is representative of a group of people there, who take their jobs very seriously but often just be sort of dismissed as bureaucrats. But a lot of people there, they’re smart, they’re committed to what they do and they take a lot of abuse. Lots of people criticize, for example, the broadband statistics, rightfully, I mean there are problems with it and it needs to be, they need to continuously update them. But the people that work on those statistics work really hard on them and they’d go back and try to make sure that the companies report them and any of the issues that we talk about with those data, the people who work on the data at the FCC know those issues too and they know them better than we do and will always want to see things get better. So I think it’s a good reminder that these are committed people who work hard on these issues and we shouldn’t take them for granted.
Jonathan Make: And maybe we can actually just talk for a minute about one of these substantive policy issues: Broadband mapping. And also the mapping of the digital economy. The latter involves many government agencies, and we heard about this at the last TPI annual event. They were representatives, or at least researchers with expertise in the Federal Reserve, the Commerce Department, Department of Labor. The FCC of course gets involved, I believe NTIA, which is a part of Commerce, various parts of Commerce, the Census Bureau. And one thing we heard there again is about the challenges, even with all of these different experts, involve often nonpolitical, often long time career government employees, in figuring out whether the economic impacts of the tech economy, or of certain elements of it, let alone things like measuring the value of privacy, which we see a lot of researchers doing and just bring it back to the FCC. One thing that has been a theme throughout this year would be broadband mapping and when you mentioned broadband statistics that kind of brought that up. That has been so challenging seemingly for a wide array of stakeholders that also include academics, a lot of state officials. We have to remember that every single state has its own mini FCC. Many of those individual regulatory commissions have also been embarking on their own broadband measurement, often to refute or correct what they believe are inaccuracies in the FCC’s own data. And to that point, at least three, two of the biggest and another major, so three wireless carriers, have been singled out as perhaps not providing updated data, but it’s very hard for anyone to measure, particularly with the mobile broadband, not just the fixed but with the mobile broadband, how widely available is it, what sort of blocks, whether the geographic sizes of the blocks, and that has been a big thing. Why it matters is the FCC, over the next 10 years, will spend $30 billion of, I think it’s our money. It’s essentially a fee that is levied on a lot of things we do in telecommunications. You know it’s a charge. It’s going to use that money to help spur broadband, 5G, which is the latest wireless technology just now rolling out, in places where it may not be economically feasible for companies to offer it without that government support. And if the mapping isn’t right, all of that won’t be right.
Scott Wallsten: You’ve got a bunch of issues in there. You’ve got mapping, universal service, federalism, but let’s stick with mapping for a second. I think one of the difficulties in mapping is that you’re building a dataset and with any dataset you want to start from asking a question and you want the data to be able to answer that question. But we don’t have a single question that we’re trying to answer with the maps. Everybody has different objectives with it, which calls for different approaches and that kind of creates confusion and one objective is to find places where there is not good or sufficient broadband or mobile service and that requires one type of measurement, possibly in rural areas. We might want to know more details about adoption rather than build out in urban areas, and that’s a different kind of mapping and it’s hard to do all of those things. We hear complaints for example, that even the census block is not small enough because of the fairly large number of households in there. But it depends what you want to do. Again, in terms of looking at adoption statistics, that might be fine. Finding specific households that can’t get service, it’s not, and we did a first attempt at, kind of hesitate to say it, but kind of crowdsourcing data with a national broadband map and we spent, how much, $300 million on that, which is kind of mind boggling and it had lots of flaws, although it’s been pretty useful for researchers. I don’t know that we’ve gotten $300 million of value out of it, but I’ve enjoyed playing with it and used it in papers, but we’re going to have maps that we don’t like unless we are very careful to define what it is that we want to do with it. Having worked with a lot of data myself, I’ve been in a position where somebody asks for a dataset of something and you spend all this effort and built a dataset and then you’re finished and they sit down with it and say, okay, what can we do with it now? And you invariably can’t do. You’re missing some crucial piece because you didn’t define that objective originally. And with all the mapping exercises that we’re involved in today, I don’t think anybody has answered that one question. What exactly is it we want to do with this? Another issue in mapping I think is that we’re stuck in this old system of counting lines as if it were a census. And in fact you can go and look back to like I think if the 1896 census of telephones where they literally counted telephones and the Census Bureau did it and we’ve kept doing that. That’s not the way we do other economic statistics. They’re often based on surveys and the Bureau of Economic Analysis and the Bureau of Labor Statistics, they know how to do those surveys. Census people know what they’re doing. So you know, you can imagine that there must be better ways that involve some parts counting and some parts surveys, but for some reason we don’t do that. We still act as if it’s the 19th century and we have to go out and count each line. It’s absurd. That’s my little rant.
Jonthan Make: I think part of it is, and we are seeing a lot of tension right now in the telecommunication space on spectrum, between a whole lot of agencies, federal agencies. I think that some of this goes back to, we have seen the development of expertise at a lot of different agencies and not just within technology and telecommunications. So yeah, while it’s my understanding that the every 10 year census and some of the annual things that the Census Bureau does along with other government surveys do get at that sort of thing, and of course with the exception of the census, they are not a census. They are using a nationally representative sample and it appears doing a very good job. That’s where we get so many of our economic statistics that are very important to our economy. So perhaps there is an argument for the FCC and NTIA, which is part of the Commerce Department that also gets involved with this, kind of having a task force and having some of the agencies with more expertise do it, There might also be reluctance to. So I guess that also raises a good point. I had some ideas about net neutrality, which somehow this brought up, but maybe you have another direction you want to go.
Scott Wallsten: No, no, you’re starting down the net neutrality road, let’s see where it goes.
Jonathan Make: I don’t want to stay on it too long only because net neutrality has been, you know, an issue, in different flavors, for almost as long as there has been a commercial internet.
Scott Wallsten: Before that. As long as there’s been telephones, we just grabbed something different.
Jonthan Make: Absolutely. What is interesting I think is with the focus we’re seeing right now on privacy, which has to do with the newer companies in this space, the so-called edge players, the tech providers, the platforms. There is somewhat of a hook between this sort, the privacy rules or at least congressional oversight that we might see on these newer players and on net neutrality because you are seeing the incumbents, the ISP, the Comcast and AT&Ts and their trade associations saying that what we really want to have are platform neutral rules where all platforms and incumbent facilities based providers have a level playing field. So to me, that’s going to be one of the next areas of focus, which is so much bigger than just the current net neutrality rules that, in fact just today, a number of players in this space have filed requests to the local federal appeals court asking the entire court to reconsider or rehear the case that upheld some but not all of the current net neutrality deregulatory rules. Seeing how that plays out, particularly, perhaps, after the congressional and presidential elections. Typically if there is a change in control of either chambers of Congress or in the administration, I think that has a lot of staying power as an issue and you have been hearing the incumbents talk about this and I think that talk is going to get louder and louder and then, we’ll have to narrow this down, but then bringing in States and preemption, we have certainly been a number of States consider and some enact and indeed some then go through the complicated rulemaking process once there’s a law on the books, regarding privacy and net neutrality and one reason we’re seeing that, I think that all sides of these different issues, and they’re not just two sides, there’s often many, agree is that in some cases we don’t have federal rules. In other cases, the federal rules may not apply to all different players equally and/or the federal rules tend to change.
Scott Wallsten: Before we move on too much to preemption, let’s go back to net neutrality and privacy. Is it that those aren’t necessarily two sides of a similar coin or is net neutrality something more likely to be brought up in the context of debates about bias and is that part of privacy also? So with the idea of a neutral platform might be something that people who think that the platform is biased against them would want, if one could define what that would be, but I’m not exactly sure how it applies to the privacy debate necessarily.
Jonathan Make: One understanding could be that net neutrality in some ways boils down to prices and that if you have certain ways of applying net neutrality, the government has the ability to regulate or set or otherwise have a say in prices for internet service. With privacy as we’re seeing more and more of there might be a cost that may not be a monetary cost to consumers to use all of the absolutely amazing platforms that are out there and there’s more and more, particularly the bigger ones. And we’ve seen some research that at least it indicates to me that as over time there are the network effects to the biggest platforms here and they are getting more sticky, more users. Therefore it’s almost like the cost to use it kind of goes up and they may be using more of your data or more of your data in more ways or in more areas. It might not just be when you’re using that platform. So I guess that’s not a great answer to your question about those two. But that does go, and you both, Sarah and Scott, are the economists, that goes right there to the economics of it and even though they may not be clear, at least to me or even the us, that seems to be part of what’s driving this scrutiny.
Scott Wallsten: Well, I think definitely they’re both part of these non-market attributes of the internet that have value, but they’re not traded in a market, so we don’t know what the numbers are. Although if you wait just a couple of weeks, we have a paper on privacy coming out where we’ll put some numbers on this, at least on the privacy side.
Jonathan Make: That’ll be great.
Scott Wallsten: So let’s go back to the DC circuit and net neutrality. What are the implications of these new events?
Jonathan Make: The implications to me are on the couple areas where the local federal court of appeals, said to the FCC, you didn’t do a good enough job and we’re not foreclosing you from acting in certain ways, but we are requiring you to go back, perhaps come up with a better rationale. For the main thing that we kind of just discussed, which is the whole price element here, the court upheld that. Meaning it upheld the fact that right now the FCC doesn’t have that authority to say to ISPs your prices are too high, we’re going to start the proceeding on that. They are of course are a lot of players that would like to see that challenge. I don’t know if that’s going to change. There are three areas, my understanding, where the court said the FCC has to go back and they’re esoteric and interesting at the same time. One is public safety, another is lifeline, and the third is stage preemption. It is not very clear how the FCC will get to where it will end up getting, which, having no inside information, I would presume would be similar to where they did go, which is to say that on public safety there is not a justification there where you need to have these price regulation allowing net neutrality rules and the issues that have come up is commercial providers that have contracts with firefighters, police departments, fire departments, et cetera. They might, sometimes accidentally, perhaps not according to policy, throttle or affect the bandwidth, telecommunications, spectrum needs, et cetera. of these first responders in a way that could hurt public safety. It seems when these events have happened, there has been, if you will, a market correction and the companies have said, yeah, we didn’t mean to do this. We will try not to do this going forward
Scott Wallsten: Are more than just, there was the famous Verizon and firefighting incident. Have there been other incidents?
Jonathan Make: I presume there happen. I just don’t know off the top of my head.
Scott Wallsten: So with these three areas, what are the biggest possible implications they could have? I don’t know whether these are the worst or the best. I’m not sure what they would mean, but what are the kind of decisions or outcomes that would have big impacts on either the way the FCC operates or the way firms have to operate in response?
Jonathan Make: I’m not sure. Obviously the cooler answer is all these things will have big impacts. I’m not sure there will be big impacts. We talked about public safety. Likely there’ll be the status quo, which is the market will take care of itself. On state preemption, that can be very big. If the FCC changes what it does and it doesn’t seem like it will. The FCC is saying that even though we don’t have the ability to regulate prices or get involved in that, we do have the ability to say that states, not just states, we’re seeing big cities do it, they have all sorts of different net neutrality rules and laws and that those that are preempted by the national deregulatory approach here, those could be overturned. Basically the court is saying, you kind of have to go back, my understanding, do your homework. The other one is very narrow, but it’s very important to a slice of people. The poor who are getting up to approximately $10 a month. Actually, they’re not getting it. The companies are getting it to provide people who are poor with service.
Scott Wallsten: Right, Carlos Slim gets most of it.
Jonathan Make: Tracfone is a major recipient of this money. The pot of money is about a billion dollars a year that is spent on all of this and there’s a budget to spend up to $2 billion a year. So those are the possible changes.
Sarah Oh: So we mentioned state preemption. Maybe now’s a good time to pivot to federalism, and I was curious to hear what you think about all the different ways federalism interacts with the digital economy. There’s privacy legislation on its way and there are questions about interstate commerce for net neutrality. What do you think about federalism?
Scott Wallsten: Just to add to that to the FCC, we have the one touch make ready so those all are also all about preempting States.
Jonathan Make: We should talk about one touch make ready it and things that have to do with pole attachments, and please audience, don’t go to sleep, hang with me for a minute, have been huge themes at some of the local and state conferences I’ve been to this year. One touch make ready and pole attachment rules are basically saying that, the incumbents are often utility companies that own tens of thousands of utility poles and they’re renting that out and other space to your local ISP to your wireless company to do things like 5G and faster broadband at home that their rights might be limited to. There’s a couple things. Number one, their rights might be limited in how much they are going to charge these people to use the pole attachment. But on the flip side, the localities that might have a role here when it’s using their roadways or their own public space or for that matter in giving citing approval for a, could be a large cellular tower. It could be something that’s, as they say, the size of the pizza box that’s transmitting these wireless signals at those localities also. So utilities can be limited in some ways and the localities can be limited in what they can charge for permission, basically what they can charge to find application, how long they can take to consider it, all these things. And so I guess really the latter part of the one touch make ready and also the use of the public rights of way by private companies. There have been some moves by the FCC to make it easier for industry to do what it wants to get you the services that you want. And that’s very, very controversial among basically every major municipality and some of the smaller ones.
Scott Wallsten: Have there been real effects of one touch make ready yet or is it too early?
Jonathan Make: It seems like in places where it’s working, I think one touch make ready is more on the pole attachment side than the municipality side, it seems like it is helping. There been some different requests to perhaps even reduce or equalize some of the rates for the different kinds of attackers, which depends on what sort of company you are more and those I think are in different processes and at the local level with the rights of way it does seem to be having an impact and you hear from, yeah, I was speaking to the mayor of Tampa for instance, that is going to impact how quickly Tampa has to let Verizon put in its small cellular picocells or microcells for 5G. it’s going to speed it up.
Scott Wallsten: But what is the mayor of Tampa think? Because on the one hand maybe they want to see their citizens get 5G faster or on the other hand it takes away some of their power.
Jonathan Make: Right, she wants to do kind of both the things you said. Which is she and many other mayors want to be business friendly. They want to get their constituent services. They also want to do it in a way that comports with their city council and the voters who are voting these people in and they are a bit hamstrung and so there’ve been various court proceedings. I believe there’s a pending court case at a the circuit court of appeal in San Francisco, other lawsuits. All of this is somewhat to be determined, but we are seeing some communities act more quickly and the companies that are doing the insulation say, you know, that’s going to help us get these products to you.
Scott Wallsten: Do you see any change in how municipalities are reacting to the law? Like for example, they were opposed to it at the beginning because they only saw the power being taken away and now they see the benefits or the opposite that now that they’ve lost control, they see companies running rough shot over them, for example. Is it going one way or the other or are they still just…
Jonathan Make: I would say status quo on the policy side. To my understanding, there are couple of handfuls, several handfuls of small communities that have been very supportive of this. Why are they supportive? Because they have a genuine desire for fifth generation wireless or fiber to the home very fast. One gigabit per second broadband service that they may not get it because they’re so small and so they’re thinking if we can say, even if we wanted to, you know, Verizon centurylink, frontier or what have you. Even if we wanted to impose regulations, we couldn’t. You can go in and do it as quickly as possible. So some of these communities do want it, but by far as far as I can tell, the vast majority of cities, counties, however you slice it, they want to have that authority. And some of the States are considering their own rules as well. But again, there’s this question of, if we’re going to have more state laws, are these going to conflict with the federal regulations? So I think a lot of this is still to be worked out. My understanding of the business of the industry right now, is that when we’re talking about the very latest and greatest cellular service, a lot of it is simply the market and the technology and getting these things installed. For instance, having enough installers to do it, not so much these rules are holding them back.
Scott Wallsten: So the constraint right now is not the rules themselves.
Jonathan Make: That’s my overall assessment, I think. I think the industry might say, well, it could hold us back a little and no one wants to slow down these things. There is such a hue and cry among consumers. Now that we have the internet, now that we’re getting faster speeds, most people just want more and better and faster.
Scott Wallsten: Right. I mean, I also, I imagine it depends where you are in the upgrade cycle. When you’re first installing any new equipment, you’ll install something, something’s wrong you have to reallocate the geographic components of it and at some point it’s just about installing faster and faster
Jonathan Make: And there appear to be, to some stakeholders, legitimate also health and safety issues in terms of the spectrum that is being emitted, the energy that is being emitted even from some of these smaller antennas and sites.
Scott Wallsten: So is that a real issue? I live in Takoma Park. So every now and then we see flyers appearing saying wifi is killing us and so on because you know it’s Takoma Park where everything kills you except that we’re a nuclear free zone. So you know, we’ve got that. Is this concern actually affecting investment or adoption?
Jonathan MAke: Great question. I don’t think right now it’s affecting those things because there appears to be very little wiggle room for any regulatory player in the system, no matter how local the level to take in the health and science into account because at the federal level the accepted science is you will be okay when it comes to the safety. That said, and I know this wasn’t quite your question, I’m not a physician or anything or a researcher, but it also does seem like there are some questions being raised as we get to different bands of frequencies that are being used, as we get to different power levels of phones that there could be some health implications there. But for now the federal government says it is all okay.
Scott Wallsten: And these questions are not just being raised by nutjobs? Not to be a cynic.
Jonathan Make: Yeah, I do not think it is just the so-called tinfoil hat wearing people. Give you an example, I believe there is one local neighborhood commissioner here who has been to some of the FCC meetings and you know his particular neighborhood is concerned about that, all the way up to some physicians and different safety groups and what they’re saying is, researchers are relying on some older research that doesn’t really study how people are using phones now, where they’re putting those phones in relation to the body, so important, how many hours a day they’re using them. And again, the different spectrum bands, you were talking about Julius Knapp at the stars. Well Julius Knapp of the FCC is looking at, it’s not just you know your TV or your radio, but it’s frequency bands that are all over the chart and those can have very different characteristics. So again, it seems like there might be some substance, but again the federal government at this point says it is all safe.
Scot Wallsten: Well since we’re talking about spectrum, implicitly, what where the big spectrum issues of 2019 and that might spill over to 2020, I mean one that’s going on right now that’s still going on as C-band.
Jonathan Make: I think the C band is the very big one at this moment and that will probably be somewhat resolved in the next few months. That is a slice of spectrum that somewhat high up in the frequency bands but not very, very high. It’s used right now by satellites orbiting the earth that are basically providing you, through intermediaries, probably everything that you’re watching on TV and even if it’s streaming it probably originated there or went through there. There’s all sorts of different companies in this ecosystem. The wireless companies would like to use it to give you more, better, faster, you know, mobile downloads and also perhaps more getting the things like fifth generation cellular, which is just starting to roll out. Also perhaps things like better medical technology to monitor your condition even if you’re not in the hospital. Ways to monitor, you know, industrial plants to control different functions in a building or a hotel. In any case, it appears that the FCC is going to allow some of this to be auctioned. The FCC itself will run the auction, not the satellite companies that are currently using and licensed to use the spectrum.
Scott Wallsten: So one of the big debates about that itself was sort of how to reallocate that spectrum. Whether we let satellite companies under the C-Band Alliance do it as a private sale or whether the FCC does an auction was one of the big or perhaps the big controversy and the underlying question was really which way gets the spectrum into higher value use more quickly and it looked like it was going to be a private sale and then it wasn’t. It was going to be an auction. What do you think? Is there a sense of in reality what that will do to the timing?
Jonathan Make: There is, but it’s so conflicting. I think it’s better not to get into it because the rationale has changed as the plans have changed. What we know will happen is the FCC is going to run the auction itself and the big question is what percentage of the proceeds or really any but probably what percentage of the proceeds, are the satellite companies going to get, they could get 10 billion, $20 billion, perhaps even more?
Scott Wallsten: Well, I think if it’s an auction, they’ll design it in a way that some way comparable to the incentive auction so that the auction mechanism itself determines what the satellite providers get.
Jonathan Make: That is a reasonable assumption. We saw this with TV stations throughout the country. I’m not sure how many billions of dollars they got, but it was certainly several billions of dollars. The federal government itself may have raised 20 or 30 billion dollars and that was to do a very similar thing with TV stations. Interestingly at this FCC meeting yesterday, one of the senators who has been very determined that the government run the auction, he was there for the whole meeting, which is unusual
Scott Wallsten:They usually don’t even stay for their own hearings.
Jonathan Make: Sometimes they don’t and you know, even though they weren’t talking about this particular slice of spectrum there, he had said he wanted to see the sausage being made and really wanted to let the FCC know that he is paying attention. There’s different bills, one of which he might even hold up if it doesn’t give the U S treasury enough money and if it might allow the satellite companies to get what in his view would be too high a cut of the proceeds. But we saw this successfully happen a few years ago with TV stations and the FCC, it probably didn’t raise as much money as some people were thinking, but it is part of getting more spectrum available to what economists would say is probably more of a highest and best use in terms of consumers.
Scott Wallsten: Right. And in terms of how much revenue it raised, I think the expectations kind of got out of whack after AWS3 auction. But you know, if you’ve go look back at predictions before that, it seemed like the auction actually did pretty well. So here’s another question. Part of the proceeding that’s going on now, there are three bands. There’s the C-band, there’s 5.9 and there’s 6 gigahertz. Somehow somewhere before this process started, there was a decision by somebody and some group of people that C-band would be licensed and auctioned in some way and 5.9 and 6 would be unlicensed. Who made that decision and how?
Jonathan Make: That’s a great question. I couldn’t tell you with any specificity. I assume it has to do with some different pieces of legislation. We’ve seen several that had been passed that amount to what the regulators can do with the spectrum and who’s going to get them. That’s a great thing. And just to shift gears and to pull back a minute with the C-band, we don’t really have any intragovernment fighting, but with some of these other bands and others, we have plenty. So with 5.9 gigahertz, which the FCC yesterday just voted on, there is some controversy among, for instance, the federal Department of Transportation.[laughter]
Scott Wallsten: I think that’s understated at “some” controversy.
Jonathan Make: It does not watch spectrum that previously was set aside for automobile safety, traffic safety to be used for wifi. While the FCC is saying this hasn’t really been used in the 20 years since it’s been authorized. Yeah, we need to do something and then moving on very quickly with the 6 gigahertz band, which is just above this 5.9 gigahertz, that has to do with utilities and I think a lot of others, I don’t think it’s just utilities and so I believe we’ve had the Department of Energy perhaps get involved there. That again is taking what these utilities are using and saying you can use some of it for wifi.
Scott Wallsten: This is kind of a new development. It used to be the case that, well we know that the federal government holds huge swaths of spectrum, primarily DOD, and NTIA under really almost every administration going back quite a while, NTIA has tried to find ways to extract some spectrum from the federal government, particularly DOD, never had much success even with executive orders issued by the president and every president from every party has said the right things and yet for various reasons DOD can just wait them out, wait for the next person to come in. Nothing ever happens. And that’s been the way it is. And we have all just sort of, we keep talking about it and hoping things and people try different things. But now we have other agencies getting into this so now DOT is involved and the DOE is involved and we hear NOAA complaining about 5G spectrum, what is going on, has the federal government completely lost control over how its agencies behave with respect to spectrum and if so, why?
Jonathan Make: Fortunately I can say I don’t think that that has happened, although it could and we may just not be aware. That is a great question and we’ve had changed. We mentioned the NTIA which is the part of the Commerce Department that’s supposed to speak for most of the federal government when it comes to these sorts of issues. They don’t have a leader right now. They are previous leader left because of some of this exact infighting.
Scott Wallsten: The speech he gave two days before he resigned is great. He talks about, he says we can’t have this sort of incoherent policy keep going forward. Of course it seems like we actually can because we do it just not a good idea that we have it.
Jonathan Make: I think it’s kind of what we’ve seen for a long time, if you will, out in the market of lobbying and ideas and whatnot, which is different users of different parts of spectrum have different values and so part of the FCC’s purpose is to make a decision about what will the highest and best value be. To mention DOD, there’s also a swath of spectrum, I think a little bit lower down, it’s also used by satellites. GPS uses it and right there the Pentagon has said, we don’t want this company called Ligado, that’s been through several incarnations, we don’t want them to be able to use this satellite spectrum for again, wireless, might be 5G. It’s a great question. Why are these different agencies advocating on their own? Partly the FCC is supposed to be, or my understanding, it is supposed to be lobbied by these different stakeholders, which can include other parts of the federal government. Certainly in the past it tended to be that NTIA, which is more firmly part of the executive branch, than the FCC, which is a quasi independent executive branch regulatory agency, that NTIA would usually speak for kind of all of the federal government and that would be the one point of contact with the FCC. Perhaps that’s changed because we’re seeing new and different uses of the spectrum and even NTIA there may not be one view that predominates in all of the federal government and therefore you have these different things involved.
Scott Wallsten: That’s really interesting, that it’s not so much a change in the institutions or governance. It’s the change of the technology that’s made the previous institutions or the previous type of governance less effective.
Jonathan Make: Possibly, and I would say that if anyone is trying to say, Oh, this must be a Trump administration or President Trump or his appointees, I do not get that sense. We started by talking about the kind of career people, the bureaucrats who have such expertise. To my mind, these are different views on how the spectrum should be used and it can be a ugly or sausage making process that kind of gets us there. And we even seen this internationally as well. Whether we would have seen this degree of difference or dichotomy in a different administration. That’s hard to say, but we don’t have any indications that, oh, this is because of this one.
Sarah Oh: Do you think spectrum is becoming more valuable? Are the stakes higher now that we see the agencies speaking up?
Jonathan Make: That’s a great economics question about the value of spectrum over time in some aggregate way.
Scott Wallsten: I wrote about this a while ago, the paper is a few years old now, but I mean the answer then was that the value of spectrum does not inexorably go up. It goes up, it goes down, it differs by band, just like any other input into a product, the product being wireless. Another interesting point about, well maybe this is a little bit too much in the weeds, but still, as you go up to these higher bands that we talked about now, 26 gigahertz, 30 plus gigahertz. Those are meant for very large swaths of spectrum. You need to aggregate hundreds of megahertz to make it useful and that makes it useful for different kinds of things. But that also means is that the way we talk about spectrum price has to change, also, because we talked about in terms of dollars per gigahertz pop, a megahertz pop and you can’t now say a dollar per megahertz pop and 700 megahertz is necessarily worth more than a penny per megahertz pop up at 24 gigahertz. We just haven’t thought that through.
Speaker 2: That’s right. It would be so hard, I know we’re running short of time so we can do this quick, it would be so hard to come up with like in an aggregate because of these things. What I can say, right, that’s changed is the technology and consumer demand for things that for consumers and not for companies or not for the federal government, not for defense purposes. The demand there is getting bigger and bigger and bigger, so that seems to be behind this and I would, just say to put in the plug for the last episode of this podcast, you could do a lot worse than to listen to, I think you call him super lawyer Bryan Tramont, in this area, talk about exactly this. He really breaks down in a way where I have seen stakeholders, I think on both sides of the issue, say you should listen to this podcast because he gets into some of the rationale here.
Scott Wallsten: That’s great. I also, I really appreciate this sort of meta advertisement for our previous, one of our own podcasts.
Jonathan Make: No one put me up to it.
Scott Wallsten: What do you think we should be looking out for in 2021?
Jonathan Make: Two years from now?
Scott Wallsten: I mean, sorry, 2020. I have already written off 2020.
Jonathan Make: As they say, not a lot might get done in Congress. I think we’re going to see with a lot of the spectrum things we’ve been talking about more movement, so we’ll start to see auctions. It’s been discussed. There’ll be a C-band auction for instance. We will probably see more of these preemption issues on all the different things we’ve been talking about. Again, I think a bigger thing to watch, pulling back, is this whole incumbent versus edge platform. What are the privacy rules, what are the neutrality rules. I think that’s going to be…
Scott Wallsten: And are we going to move ahead on those in 2020 or, because of the election, a lot of it’s gonna end up on hold? I mean, you know whether or not you think these FCC rules of votes on spectrum are good or bad, they’ve done a lot recently. Can we kind of expect that progress to continue?
Jonathan Make: Privacy has not tended to be something with momentum in the federal level. There are lots of different bills and some bipartisan interest in it. It is hard to say. I don’t think there’s a 0% chance. It is hard to say if we will see, you know, a privacy law and then we’ll start to actually see impacts of that. I can say that a lot of legislators do seem to be trying to, you know, take off their partisan fighting hats and they appear to be kind of looking out for what they consider the best interests of consumers and maybe setting aside who’s giving them money, lots of legislators doing this. So it’s possible.
Scott Wallsten: Okay. I think that’s about all the time we have. Jonathan, thanks so much for coming by talking to us about this. Always fascinating, love talking to you and look forward to continuing to read your stories this year.
Jonathan Make: And we love talking to you all. Thanks.