Standing in the Way of Next-Gen Wireless: What Gives, Mayor Liccardo?

Doug Brake November 6, 2017
November 6, 2017

(Ed. Note: The “Innovation Fact of the Week” appears as a regular feature in each edition of ITIF’s weekly email newsletter. Sign up today.)

The next generation of wireless technologies lie at the feet of an old-fashioned, humble piece of infrastructure: the utility pole. Advanced communications networks, particularly 5G wireless, require a shift away from large, wide-coverage cell towers toward much more numerous, low-power “small cells”—tiny towers the size of a pizza box. Utility poles and streetlights, already wired, powered, and at just the right height, are the only way to economically deploy the small cells needed for 5G.

As a result, utility poles have become the focus of broadband policy. Mobile providers are itching to build new infrastructure to support small cells, but some cities aren’t exactly rolling out the red carpet. Local governments (for better or worse) want to maintain control over the deployment procedure, the coverage areas, the aesthetics of their neighborhoods, and—most importantly—the fees telecom providers pay to access their poles.

San Jose is one example. In a recent New York Times op-ed Mayor Sam Liccardo came out swinging for local control of small cell siting and pole access, railing against alleged “sweetheart deals” giving wireless companies streamlined access to poles. But his argument is flawed, and his motivations are questionable. 

Liccardo claims “Big Telecom” is out for “below-market” fees to access poles, and customers won’t benefit from next-gen services anyway. But neither assertion is true. The real story is these poles can be cash cows for local governments.

As the Information Technology and Innovation Foundation has written, when it comes to small cell siting the interests of a municipality can diverge from the broader national interest for better broadband. From the local officials’ perspective, the optimal fees for a small cell deployment would be the highest possible price where the provider would still deploy the infrastructure—never mind that these costs get passed through to all the wireless customers outside city limits. Wealthy, tech-savvy cities in particular are in the catbird seat, with providers eager to compete for power-users’ business.

Liccardo has this figured out. As it turns out, San Jose, known as the “Capital of Silicon Valley” and one of the richest cities in the world, is in the process of updating its streetlights with a number of “smart” components, including (and funded through) small cells. The smart pole procurement is on pause, as city staff were concerned that accepting any of the proposals they have received so far “might jeopardize the City’s ability to fully monetize” the poles. What’s more, in a memo from Mayor Liccardo to the city council, he recommends the city council not accept a contract unless the city “share[s] in percentage of revenue … at a share more favorable” than the proposals, and that the fees to telecom carriers must “substantially exceed” those that were proposed.

Basically, Liccardo wants more money, going so far as to state that “San Jose will achieve ’Best Pricing’—if another City gets better rates than San Jose, then San Jose shall be entitled to that rate as well.” This race to the highest possible fee is Liccardo’s idea of “market rates.” 

Cities certainly have an important role in this process. Controlling the aesthetics of neighborhoods and ensuring wireless access is spread broadly to all neighborhoods, for example, are legitimate interests. However, what is less savory is a city holding out, working with consultants to extract the maximum amount operators are willing to pay to access taxpayer assets. It seems the request Mayor Liccardo poses to his fellow San Joseans is ask not what we can do for our country, but ask what our country’s wireless customers can do for San Jose.

Doug Brake (@DBrakeITIF) is a senior telecommunications policy analyst at the Information Technology and Innovation Foundation, a leading science and tech-policy think tank.