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Proposal for nationalization of 5G network is dead on arrival

Kristin Smith February 12, 2018

This article originally appeared on Law360.

“We’re not Venezuela.”

These are the words that I heard from House Energy and Commerce Committee Chairman Greg Walden, R-Ore. while sitting in the audience at the State of the Net Conference in Washington, D.C., shortly after the news broke that the White House was considering a plan to nationalize the next-generation 5G wireless network over national security concerns. The Energy and Commerce Committee has jurisdiction over the Federal Communications Commission (FCC), National Telecommunications and Information Administration (NTIA) and most policies related to the telecommunications industry, so his opposition is notable.

Axios broke the news by publishing a 30-page PowerPoint presentation and memo that it said were written by a “senior National Security Council” official. The National Security Council (NSC) is the body of advisers within the Executive Office of the President that advises the president on national security and foreign policy issues.

The documents call for a federal takeover and rollout of a 5G network. In their ideal scenario, they foresee one federal network built to the highest security standards which will then be leased to providers who want to offer wireless services to consumers and enterprises. Why the need for the federal takeover? According to the documents: China. China leads in the manufacturing of 5G equipment. Chinese cyber security threatens emerging technologies. China is leading the U.S. in artificial intelligence.

My fellow attendees at the State of the Net Conference were dumfounded by the proposal. One commented that the leaked documents were amateurish and would have been quickly put to bed if they had been moved up the chain or across the hall to their colleagues at the National Economic Council (NEC). Another asked that, considering the massive U.S. Office of Personnel Management (OPM) data breach, if the federal government has no ability to protect the sensitive data of its own employees, how could it handle the security demanded of wireless network? Yet another said the complex government procurement process would only slow down deployment of 5G and prevent network advancements and improvements into the future. One person noted that the nationalized 5G idea goes against a core principle of President Donald Trump’s agenda: deregulation.

All of these points and others make a strong case that nationalization of the 5G network will not occur. Of all the reasons out there, one stands out as the biggest barrier: Congress.

In theory, the Trump administration could unilaterally nationalize the 5G network. Section 606 of the Communications Act gives the president the authority to seize communications facilities in an emergency, such as during wartime or the threat of war. Executive Order 13618, signed by former President Barack Obama, delegates this authority to the U.S. Department of Homeland Security. Presidents Ronald Reagan and George Bush signed similar orders.

But absent a wartime emergency, the nationalization plan requires authority from Congress for a federal agency to undertake the construction of the network and to gain control of the spectrum needed to operate such a network.

Moreover, the Trump administration needs money to fund such a venture. The memo indicates that private capital will fund its construction and that investors will be equally as eager to invest in the government network as it is in AT&T, Verizon, Sprint or T-Mobile. The memo also points out that private financing would not add to the national debt.

Article 1, Sections 8 and 9, of the United States Constitution give Congress the power of the purse. Even if the program were funded by a special government bond, Congress still would need to approve of the spending of such funds on a next-generation wireless network. This means that no network can be built unless Congress is on board.

If Trump does decide this is something to pursue, he would start by requesting funds from Congress in his annual budget. In the world of budget and appropriations policy, it is well known that the annual exercise of the president preparing and submitting a budget to Congress is just that: an exercise. In fact, when I worked for a senior member of the House Appropriations Committee, we would joke that the new door stop was arriving when the phone book-sized budget books were dropped by the office each year. Congress takes its power to allocate taxpayer dollars seriously and pays little regard to White House priorities unless they believe it is their best interest to do so.

Congress is a political body, and the wireless industry are pros when it comes to playing politics. In 2017, CTIA, the trade association that represents the wireless industry, spent $10.9 million lobbying members of Congress. AT&T spent $16.8 million, the second highest amount of any single company. Verizon spent $12.2 million, Sprint spent $2.5 million, and T-Mobile spent $8.3 million. As far as Washington lobbying expenditures go, the wireless industry is as large and as effective as anyone.

So what did the wireless industry have to say about the leaked proposal? CTIA said, “The government should pursue the free market policies that enabled the U.S. wireless industry to win the race to 4G.” AT&T said “thanks to multi-billion dollar investments made by American companies, the work to launch 5G service in the United States is already well down the road.” These statements are markedly different than the “mixed” industry reactions predicted for AT&T, Verizon and Sprint in the NSC memo.

Further efforts on this issue appear highly unlikely, especially since the White House downplayed the memo and Trump’s own FCC Chairman, Ajit Pai, came out in opposition to the plan. If the Trump administration formally proposed a 5G nationalization and it were to become a policy of the Trump administration, the wireless industry would unleash a lobbying battle on Congress that would likely doom any chance that the project would be funded by Congress. Over the past decades, the telecommunications industry in general has achieved major wins in the Telecommunications Act of 1996, the Tauzin-Dingell bill that paved the way for FCC action on favorable regulatory treatment of broadband services, and prevention of unfavorable net neutrality legislation. AT&T and Verizon in particular excel at these policy battles. Anyone who understands how the sausage is made knows that nationalization of 5G is dead on arrival.

Kristin Smith is a policy advisor with our Lobbying & Policy Group in the Washington, D.C.