5G not only offers exponentially faster wireless downloads, but it is the key to unlocking a number of other emerging technologies like the internet of things, smart cities, and fleets of self‐driving cars. Yet 5G is fantastically expensive and so has incentivized a controversial corporate merger between Sprint and T‐Mobile in an attempt to keep pace with AT&T and Verizon.
This week, Paul is joined by tech policy expert Roslyn Layton as they discuss the implications of 5G, the Sprint / T‐Mobile merger, and how we should understand property rights and spectrum auctions in an accelerating digital age.
What is 5G and how is it different than what we currently have? Will machines use the 5G internet? How is 5G intelligent? Where will 5G go first? What do ‘robot bees’ have to do with 5G connection? Is 5G the 4th Industrial Revolution?
00:05 Paul Matzko: Welcome to Building Tomorrow, a show about the way tech and innovations are making us all better off. I’m your host, Paul Matzko. We’re talking today with Roslyn Layton about new 5G cellular technology and how it might change our lives over the next couple of years. Now, Roslyn’s a visiting scholar with the American Enterprise Institute, a visiting researcher at Aalborg University, and a vice president with Strand Consult in Denmark. It’s quite a list. Thanks for coming on today, Roslyn.
00:35 Roslyn Layton: My pleasure, thank you for having me. I just wanna say I love the work you do at Cato, and I appreciate all your listeners. I’m a techno‐optimist and I see… Our media gives us so much negative discussion about technology, and I see all the benefits. So I look forward to our conversation today.
00:52 Paul Matzko: It’s true. We’re kind of the inverse of Black Mirror. Rather than the worst‐case scenario, we try to imagine the optimistic use cases for this new technology here on Building Tomorrow. Why don’t we start with the basics, Roslyn? Now, I know my phone company keeps bragging about how their 4G service is better than the other guys’ 3G service. And I get that large numbers are bigger and better than smaller numbers, so five is bigger than four, so 5G must be better than 4G. What is 5G, how does it work, and how is it better than what we currently have on our cell phones?
01:33 Roslyn Layton: 5G is the next iteration of the mobile standards. It talks a lot about speed, so between 10 to 100 times the speed of 4G today. So that’s a lot about capacity. The other important thing is about the lack of latency. So even though you probably enjoy 4G, some things maybe… Necessarily, streaming a movie, you will get seamless capability. When you look at 5G, you have the ability to do remote surgery. So the quality, the speed, the lack of latency, and the data coming through, that’s really what 5G is about. And it’s also about the use cases. We think a lot about our mobile phones and using the Internet. 5G is really about the internet of things. It’s about machines using the Internet. It’s about industrial applications, railways and coal mines and oil fields, and every kind of… The electric grid, smart cities. All of these… Smart homes and so on, smart cars. So different sort of… It’s not just about individual users, it’s about connecting machines, it’s about bringing intelligence to the different activities that we do. And so that’s why it’s… Maybe for some of us, it might be hard to understand. We haven’t experienced those things. It’s just not just about having a smartphone anymore.
03:03 Paul Matzko: Yeah, it’s more than just, “Okay, we’re gonna get incremental speed improvements to our cell phones.” I mean, that’s true, but… And the way I’ve put it mentally with that combination of low latency and high bandwidth is to think of how the stream of information being both something that flows faster, and the channel is deeper. Latency and bandwidth, both of which improve the kind of information data sharing flow between servers and your phones or other connected devices, which does lead to faster cellphone use. But I do like how you mentioned it’s about more than that. Right? It’s not just upgrading from the, “Oh, my Apple 7 is a little bit faster than my iPhone 6,” and so on.
03:58 Roslyn Layton: Can I say one other thing, too? It’s also about more efficiency with the power consumption as well as the spectrum. One of the wonderful things that we have found with 5G was we’ve been able to recover parts of the radio spectrum we never thought that could be used for mobile service. So, for example, your listeners might have heard of the incentive auction. We took this low‐band spectrum that was used for television and recovered that high… And using… Previously, parts of the radio spectrum nobody thought could be useful for these things, and 5G is intelligence, so it can switch its capabilities depending on the spectrum it’s using, the service that’s at hand. It’s flexible and adjustable and smart. So if you have an application that can be done on a… It will adjust to be more efficient given the task at hand.
04:58 Paul Matzko: Well, that kind of flexibility seems very valuable, especially with, I think, some of the use cases you already teased in your response, with like the internet of things, or with driverless vehicles, where you have the potential for… Let’s say you’re on the highway and you’re driving your smart car, and you want it to communicate with every single car it passes. They’re sharing data seamlessly in real time, and they’re uploading data to servers back at corporate headquarters, wherever the manufacturers are. You need that kind of flexibility because any gap in coverage has implications for how this technology functions, for the reliability of it and etcetera. So I think that flexibility is quite fascinating, especially given that it was… This is spectrum that if you had an auction for it years ago, would have been relatively valueless. We’re only now seeing the potential value in what was considered junk spectrum, which is fascinating as well. That’s actually quite interesting too. Maybe I should give our listeners a grounded example when we talk about speed gains. So again, this isn’t just about speed, and we’ll talk about some more applications here. But as I was trying to think of an illustration, we’re talking about exponential gains in capacity and bandwidth.
06:25 Paul Matzko: So one illustration was potentially 1000 times faster download speed, so an entire 4K high‐def film, you could download on your phone in 10 seconds, or the entire Transformers franchise in under a minute, though, why you’d voluntarily subject yourself to cinematic torture, I don’t know. But we’re talking about, again, not just incremental increases, but exponential increases in the kind of capacity of 5G wireless. Roslyn, could you walk us through? So you mentioned a bunch of examples of where 5G… What kind of technologies 5G could make plausible or kind of useful for mass adoption? Could you maybe explore some of those a little more for our listeners?
07:16 Roslyn Layton: Sure. So one of the things I think we talked about was, what would retail be like? Let’s say, okay, consumer application, you wanna shop online, and so let’s say when you wanna buy luxury goods, cars or art and so on. Frequently, we wanna feel the product in real life, or test drive it, or so on. 5G would allow you to have kind of virtual reality, augmented reality, which are things where you’d have what would look like a hologram of a person, a real person inside of a screen. You could hold up your device or your tablet or your smartphone to your living room, which would be automatically repainted or reshuffled with, let’s say, the kind of art you wanted to buy, or furniture that you’d wanna buy, the ability of having that augmented with an avatar, walking you through, that you need to have a lot of throughput and data to have that work, and it needs to be seamless. If there were so many gaps in the conversation, it wouldn’t work. So that’s one thing.
08:23 Roslyn Layton: I like the example of the autonomous vehicles, and by the way, you don’t need to drive. I mean, our leading cause of death in the US is drunk driving or car accidents; it’s terrible. People do like to drive, but it’s quite a dangerous endeavor, [chuckle] if you look at the numbers. But there’s so much information around, and being able to harness it, put it together, and also fuel efficiency, other things that if you can imagine an entire driving experience so that as, let’s say, the street lights, that they turn off and on if something is there, conserving energy. You have the energy embedded within… Using the different kinds of sensors within all sorts of services. The ability for the car to take into account the weather conditions, or the safety conditions, or the traffic conditions, and so on. All of those things that when we… Of course, our human brains are very smart, but we can’t… What you can’t see this around the corner, that could be able to be incorporated into the experience, to have a safer experience, more efficient, more speedy.
09:40 Paul Matzko: So the other thing to say is 5G won’t be a sort of push button switch. We’re gonna evolve. A lot of the 5G things will start to be realized on 4G. So a lot of these things we’re starting to see parts of today, we’re enjoying, especially in healthcare, we’re having a number of innovations there. Some of these… But where we’ll see these shifts will be on the industrial scale. So for example, smart signaling for trains, the ability to be able to… Over agriculture, you want to be able to look… If you had to survey… You wanted to plant a field, and if you take a microscope on the soil, there’s all these nooks and crannies inside the soil, and then immediately, you could have precision agriculture which will adjust the planting or the irrigation or the fertilizing or everything, to the sort of micro‐level down to the centimeter of what the additions are at that particular place.
10:45 Roslyn Layton: So that sort of ability to incorporate the information and deliver a service for what’s exactly needed across huge miles and acres. That’s the kind of thing you have to have a wireless network for that has long capability, you have to have the spectrum, the intelligence, the ability to process all of that in real‐time, automatically, connected with devices. So that’s a sort of higher order kind of processing that is just not about our telephone and our home computer. So we’re really talking about the ability for industry to operate at a totally new level. And that’s where it’s not just about us and what we can do every day, it’s making all of our industries more intelligent, more efficient. That is important when we talk about what can be the jobs of the future, because there will be all these marginal efficiencies where we’ll squeeze out where today that…
11:44 Roslyn Layton: Just the same way micro transactions and the long tail and how all of our systems have been able to find new sources of revenue or value because we now have the ability to measure at small places or in small increments, microfinance, that kind of thing. Think about 5G doing that in our industry. We can always think about, how do we improve American industry? Say we ran out of oil. Well, we found new ways to find oil. Keeping going all the time, always finding more efficiency. And so the spectrum example is great because we thought that the low‐band spectrum, that was junk and nobody could use it. Well, it turns out over long distances, that’s super because you have an agricultural area or farm or oil field, whatnot, that you can actually turn that into something valuable.
12:37 Paul Matzko: I’m struck by a couple things here. First of all, some of the use cases that I proposed, like the autonomous vehicles and the like, they’re within our imagination. It’s technology that is being developed on a relatively small scale, but that for mass adoption, will require truly more capacity than we currently have. But again, it’s within our imagination. It’s something that we can currently see prototypes of, we can currently see… You can drive your Tesla on driver assist even right now. But I like your industrial examples. I was actually reminded, I was at TechCrunch Disrupt out in San Francisco a couple weeks ago, and they had a startup on the exhibition alley for livestock tracking. So every individual animal would be tracked, and you could basically do fascinating things with herd management.
13:34 Paul Matzko: You can tell which areas of the paddock they’re specifically in, down to the inch, so that you can prevent over‐grazing, or effectively, you can do a better job of exercising them or not exercising them, or where you put the feed to feed the whole herd, all kinds of cool stuff that’s capable, but again, that requires… For large‐scale adoption, it just requires more bandwidth than we currently have. Another example that came to mind was… I saw a patent filing by Walmart to create little fleets of thousands of robotic bees that would do micro‐targeted pollination.
14:15 Paul Matzko: We’re having a crisis with bee die‐off, which leads the problems with pollinating crops. And rather than just spraying fields, which is kind of the default right now, and hoping some of that pollen drifts where it needs to go, you can be a lot more efficient and more cost‐effective, increase production per acre by, in theory, sending these fleets of bees. But again, that requires the kind of bandwidth that comes with 5G, and that’s not something that’s currently possible with 4G technology.
14:48 Roslyn Layton: Well, but let me say… Right, but what’s so exciting about that is that our major… Let’s say that there will be step function improvement. It could happen in a rural area. So it’s not like, “Oh, in Silicon Valley, we’ll see this great 5G adoption.” In fact, that may be the last place because, in fact, cities are some of the most difficult places to get this deployed. You can go to a rural area where the particular residents or that municipality says, “Hey, bring it on. We wanna… ” That you could find across one railroad or one oil field or one farm, that they will quickly make an application and have a proof point. So we could find Mississippi will be the leader, or Indiana, or whatever. And so there’s an exciting democratization there that could, I believe, bring some equalization between rural and urban areas, at least in terms of new economic development. So that’s what’s also exciting. We don’t know exactly today where all the business models will be, which industries will be first.
15:52 Roslyn Layton: We can talk about this industrial internet of things and see that the efficiencies are there. Definitely, there are industries who want to get this deployed, they’re working with policy makers, they’re trying to do drones and so on, administration trying to work with them. But what’s also exciting is that the established players we know today may not be the winners of the future. In fact, you have kind of a shake‐up, and what may emerge are companies we haven’t heard of, because it’s not clear exactly who will build the better mousetrap today. But we’re all watching these things that you talk about, the livestock example, or what we can see when you go to Disrupt and these other conferences. So little by little, it’s happening. And it’s incremental. As I said, it’s not a push button and overnight everything will the world of 5G. It will evolve. It’ll be like a flywheel, right? It’ll be a snowball effect, little by little. We are doing pre‐5G. At least 25% of Americans have some kind of Alexa or Google Home device that they use, so already, Americans have adopted extremely fast, even faster than they were adopting smartphones. So people have really quickly integrated these… They’re experimenting and working with these things already.
17:17 Paul Matzko: Verizon actually sponsored a panel at TechCrunch, basically promoting what they were trying to do with 5G, in contrast to AT&T, and they made quite a large claim. And I’m actually a historian by training, and so it was a historical claim, and so I was intrigued by it. But they said they think of 5G as the, I think it was the fourth industrial revolution, which seemed a bit grandiose to me, but at the same time, there are some interesting corollaries where, if you think of the combustion engine, well, when it’s first developed, there’s not a lot of immediate use cases. Its first application is industrial applications, doing stuff that formerly required water power. But eventually, it transformed, it worked its way down to, “Yeah, okay, we get the combustion engine as a driver of industrialization.” So I thought that was a… It was an interesting claim. I’m still somewhat skeptical, but what do you think, Roslyn? Do you see 5G as having that kind of possibility?
18:19 Roslyn Layton: Yeah. Well, I really like that those two companies have a bit of rivalry, because they’re such that it’s relevant to the telcom and tech policy, people wanna paint them out as a duopoly, and they’re actually extremely different companies. They are as different as night and day, and they’re pursuing very different strategies, and I think for consumers and competition, that’s fantastic. It’s a great thing. They have… Now, of course, both of them have 5G strategies, but they are playing in very different parts of the ecosystem. They’re placing bets in different ways. So for example, Verizon, it really wants to be first in the home broadband market. They wanna displace cable. They want you to stop… They want you to give up your cable company, instead buy the 5G home broadband product, so that you’ll get all your movies and broadband and everything through the air, and they’re using a particular set of spectrum to do that.
19:15 Roslyn Layton: AT&T has a different strategy where they’re working with, in many respects, becoming a content media company, that they have purchased a number of well‐known brands to deliver content. So they have a different view that way. They also have the biggest public safety network, so they’re looking at this industrial application around public safety. That’s extremely interesting because if you think about the way that we fight fires today, or the way that we address disasters, we’re so much more efficient today than we were five or 10 years ago. The ability…
19:51 Roslyn Layton: So for example, when I was in… We had a hurricane in Florida where my family lives and I was in Denmark last year, through the entire hurricane, I kept in touch with my family through the Internet. And we were in touch on SMS and Facebook and phone and so on. So the ability now that, when we have disasters, we can locate people we can rescue them, the way that first responders can coordinate to address when there’s an emergency, we have just, overnight, have improved that and it’s getting better all the time. So there’s a lot of enterprise uses that you might not really hear about every day in the press, but they’re going on. And both AT&T and Verizon, they’re working in different ways, it’s very exciting to see. And that’s great, because it’s the competition. They also have a lot of intellectual property, they’re supporting different kinds of patents, different kinds of activities. So they are a real driver in our economy, just given the level that they invest. And then, of course, Sprint and T‐mobile as well, as well as Comcast.
21:00 Roslyn Layton: Just for your listeners to understand, one quarter of all the world’s investment in broadband networks is going on in the United States today, and we’re just 4% of the world’s population and all of this money pours into our economy by private companies trying to figure out how do we deliver the internet to people, what do we do, what are the services? So that is an important fertilizer for all the devices and services and applications and all that other stuff that goes on, because fundamentally, we have companies who’re willing to make an investment in network. So 5G, we’re looking at $275 billion over the next four to five years. That’s a staggering amount of money, is more than any other industry is putting into American economy. And in many cases, it’s not even clear whether they will recoup all of that. Because as I said, that investment may turn into ways of revenue for other parties, all the others… So for example, the Google’s and Facebook’s of the world, or the device makers, or the other services, and yet companies we’ve never heard of today. So that’s an important part of the dynamism that 5G will create, and that story is being written right now.
22:17 Paul Matzko: This actually, I think, leads us to something I was interested in asking you about, which was, so you have the two big dogs in rolling out 5G Tech are AT&T and Verizon. The third and fourth largest, basically, phone carriers right now are Sprint and T‐mobile, but my understanding is they’re relatively distant third and fourth. There has been some brouhaha over a proposed merger between Sprint and T‐Mobile in an attempt to kind of catch up with AT&T and Verizon. How does that play into this 5G story?
22:52 Roslyn Layton: Right. So, and by the way, you know there’s also cable companies, so Comcast, Charter, these companies have very large footprints across the United States. They already have wires in the ground and Wi‐Fi networks. So they’re interested to play in this place too. So it’s not exactly correct to talk about the traditional mobile wireless carriers. You have also fixed wireless solutions that are companies that are not household names, they wanna play in there. So we actually have a couple of presence of auditors in fact. But the instance for Sprint and T‐mobile, this is really a question of synergies and a level of investment. Sprint has a lot of spectrum, T‐Mobile has a lot of the customers, they have a prowess in marketing, they’re really good at marketing and billing customers, and…
23:44 Roslyn Layton: They want to be able to combine their assets together and basically win market share, take away market share from the AT&T and T‐Mobile, Comcast. They wanna play in the home broadband market as well. They’ve been very successful to do that, T‐Mobile at least. So the process of consolidation is a natural process. It’s always going… It has been going on and will continue. The AT&T of today, or the Verizon of today, is not the companies that they were 10 years ago. They all formed out of the break up of AT&T and all these new companies spawned out of it.
24:23 Paul Matzko: The Baby Bells.
24:24 Roslyn Layton: Yeah. So the Baby Bells is broken up and reformed in new ways and so on, grow in different things, different… So it’s constantly evolving and changing. But in the case of Sprint and T‐Mobile, this is a… If you just looked at the mobile wireless market, is that the capability we have with just consumer mobile service, we have increased by, I don’t know, thousands of percents of improvement in the quality of mobile phones and we’ve brought down the price like 99%. So there’s been tremendous efficiency in getting more capacity and low‐end… Meanwhile, all the time that we’re increasing the capacity on the mobile phone, the price has fallen. So all of these companies have, in fact, declining ARPU, which is “average revenue per user”. So you get all, over time, increasing value at a lower unit cost. And so now, the opportunity is what’s the next stepwise function? Can I get more… Ever more data into my package. Can I do ever more things? So Sprint and T‐Mobile just wanna go up the value chain, if you will. They wanna be able to take market share away from other players. I mean, that’s something that we should encourage. So that’s what’s going on.
25:51 Paul Matzko: I do get the impression that, in a sense, what’s happening is that the provision of raw Internet, of access to Internet is being commoditized, and so the margins on commodities are much tighter than margins on other kinds of consumer services and goods. So as you say, when you’re trying to go up the value chain, it’s… Well, you can get a healthier margin when you’re selling streaming services like Netflix or some other kind of company. But in a sense, in a 5G world, in a competitive 5G world, there’s not nearly as much relative value in providing that service. I’m sure there will be for the first one to get there.
26:32 Roslyn Layton: Yes, absolutely. So the value of your consumer broadband, if you’re any one of those companies, will maybe become smaller. So you really wanna figure out, “What kind of enterprise or industrial use can I do?” and that’s why all these companies are making different bets in different enterprise sectors. So… And they’re buying content, because they don’t wanna be in the world of commodities, [26:53] ____, I mean that’s over. For a long time, our regulation has tried to make them into dumb pipes. Just these kinda giant pipes delivering indiscriminately kind of data. But the services that we wanna use actually need very sophisticated… They have sophisticated needs, they have a certain kind of treatment, if you will, that they need to have in order to work, some has to be prioritized in a certain way. And again, you don’t wanna wait 10 years to do that. You wanna be able to start delivering today in an intelligent way, ever better service. So we have software‐defined networking, we have a number of ways to make the existing networks to have more efficient through software improvements, through better management, and so on. And then also… So part of that idea of selling the content or adding value‐added services, helps the companies get revenue in the short run to fund those long‐term improvements.
27:55 Paul Matzko: Mm‐hmm. Well, now, I think you’ve lead us in a useful direction, and it raises questions when we talk about the Internet as a series of dumb pipes of Internet service providers as providing pipes like a utility company would or water pipes or sewer pipes. This leads us to a conversation over net neutrality, which is still very much a live matter with the FCC changing its approach, basically repealing some title to net neutrality rules recently to the anger of a lot of activists, the open Internet activists. How does the 5G conversation affect that net neutrality debate?
28:35 Roslyn Layton: Right.
28:36 Paul Matzko: What does that look like a couple years in the future?
28:38 Roslyn Layton: Well, so I can tell you today, I mean, by definition, 5G is intelligent network. It is the antithesis of what net neutrality means if all data is being treated the same. That is a totally, from an engineering perspective, a dumb concept. It’s a stupid concept. I like to bring it to the point of view of personal freedom and personal choice. In a net neutrality world, I have to provision… I’m required by the FCC to buy an Internet connection, which is enabled for content for which I don’t support, I don’t agree with, either politically or for my moral reasons, I have to… And it might not need to purchase it, but I have to have… I’m essentially paying for a capacity that I don’t need. And in a non‐neutral world, in a world of Internet freedom, I’m actually gonna support the sort of content services and data I personally believe in, that I think are socially valuable, not what’s privately valuable. I know that many people enjoy the films of Netflix, that’s fine, but it doesn’t mean I have to provision them. I may enjoy other kinds of content. But in a free world, we shouldn’t have to be coerced to support information that we don’t personally agree with. We should be able to support information that we find socially valuable.
30:05 Roslyn Layton: So one of the things I have always advocated for is a set of the Internet, which is essentially socially valuable services which are provided for free, and you don’t need a lot of data to do things like bus schedules, or basic education materials, some kinds of healthcare videos and things like that. And those kind of things are not allowed in the net neutral world, and these models are used in developing countries. So things like, you wanna check that your AIDS medication is not counterfeit, or that you wanna… You have a woman suffering from a terrible disease wants to watch a video on some kind of information to recover, how to take care of a child or whatever. Those kind of things are socially valuable, which should be provisioned for free, either by the provider itself, philanthropy, the government, what have you, and they don’t take up that much data. So in a kind of world where there’s flexible pricing for data, we can allow for some things that everybody could access for free. And then the part of the Internet that’s privately valuable, the entertainment, that part can be priced, and that is up to the supply and demand in the free market and what have you.
31:22 Roslyn Layton: So this notion that all data is the same is fundamentally against the idea of a world where we have free‐thinking people, because we don’t value all things the same and there are other cases where we can make to say “Well, it’s socially valuable that certain kind of information, you could be able, at any time, to go on the internet and access, it’s fine.” Fair enough, whatever the case may be. But you wanna see, whatever, someone’s favorite video game or movie, and you want it in a certain quality, then that will have a slightly higher price or whatever.
31:58 Roslyn Layton: So we’d actually have a lot more Internet for everyone if we allowed flexible pricing. And so this, to me, this is one of the areas where this particular policy is so fundamentally unfair and cruel to the poorest people to being a socially‐minded policy where everybody would benefit, you would actually allow flexible pricing. Just to give you another example, I live most of the year in Denmark and sometimes I have to testify in a regulatory hearing in another country. I can go on Skype, or whatever, and do my testimony, rather than getting on a plane. I’m willing to pay a little bit more for that experience because I don’t have to go on the plane, I’d like to guarantee the quality, and so on. Today, in a net neutrality world I’m not allowed to do that. There’s a lot of rules. Yeah, so as we’re saying, right we wanted to have this… We would like to have for just this conversation, a quality guarantee that our connection would work, and we can’t buy that today.
32:56 Paul Matzko: That’s right. Yeah, and it reminds me of I was just reading an article by Tim Wu who’s the, I think, he’s a Columbia, if I remember correctly, Columbia Law professor, who coined the term net neutrality and is an open Internet activist. He called for a nationalized 5G network. And so it’s clearly a very different vision of what this future Internet looks like. I think both parties over this debate want the same thing, which is a competitive Internet marketplace where Internet providers compete with each other, they have very different visions of how to arrive there. So, no, thanks for digging into that. I would like to move now I think to talking about a recent FCC decision that might not be immediately obvious to our listeners, what it means 4 5G. And that was the FCC deciding to cap pole costs for putting up these 5G antennas, and they kept the dollar cost of that to $270, that’s all municipalities are allowed to charge for them. What is the significance of that ruling? What’s going on there? I don’t know if our listeners are going to naturally understand what that ruling means.
34:14 Roslyn Layton: Well, I’m glad you brought that up, and I just wanna say that this effort, it was an order voted on by the FCC on the 26th of September, around streamlining and fast tracking the roll out of 5G. It’s in the idea of telecommunications policy. It’s something we’ve been doing for 100 years, so we have always had a notion that there’s value to communications, there is a value to having all Americans having access to communications, and that it’s part of the reason that the FCC was set up, I mean not that it’s perfect today, was to ensure an agency that could enforce the national policy. So of course, I imagine our listeners would be bristling with the notion of a price control, but there are demonstrative problems. I can tell you, for example, in Denmark we had a case where 19 cities created a price cartel so that the rental price was four times the market rate.
35:14 Roslyn Layton: So unfortunately, a lot of local actors, they can band together and create these cartels that will restrict or inhibit the ability to deploy networks. And the laws that the FCC has invoked are extremely clear because we have laws on the books for more than 20 years that localities, municipalities, they’re not allowed to create undue burdens to companies who wanna establish communications networks. And so whether it’s a undue delays to get the permits to build, or it’s an exorbitant price and so on, that’s something that the FCC can, what we call, pre‐empt.
35:58 Roslyn Layton: To put a perspective, already, at least 20 states have agreed, and they’re red and blue states, they’ve said, “Look, we want networks. We want to streamline. We don’t wanna reinvent the wheel. We know that there’s a lot of best practices that we can create a model code.” So most of the States have already gone ahead and have agreed to streamline this. And the idea, of course, is we want the maximum number of providers to deploy, right? So for example, there’s a policy called “One‐touch, make‐ready” that if you’re gonna have a street pole, when you get that pole ready, you can get five providers on that street pole, it’s not just for one. It’s the same idea as a “Dig Once” policy, if you’re gonna dig a trench and put down a conduit, by golly, make sure that everybody can use that trench. You don’t wanna come back in a year and they you dig it up again because that’s extremely costly.
36:54 Roslyn Layton: So due to a lot of common sense ideas, this is, unfortunately, to… We had at the beginning, 20–25 States already went ahead and said, “We’re adopting the model code. We wanna be far. We wanna get moving. China is moving 12 times as fast as we are to get network deployed, we gotta step up the pace.” And what we have now is a lot of cases where we have hold out, where you have cities that have chronically mismanaged their resources, they’re in deep debt, and they look at this opportunity as a way to earn revenue. So they’ll say, “Hey $5000 for every street pole,” it just doesn’t scale. If you wanna have these networks in rural areas, you want them across the US you have to be able to have a reasonable rational approach to the pricing. And the other point is these are not natural markets in the sense that there’s not a natural market for the street pole. It’s a monopoly, it’s owned by the city, and they’re essentially the owner, they don’t have… There’s not competing providers of street poles. So this is, again, and I’m a free‐market person, this is a case where regulation is necessary because you have to provide the information and you also have to protect from abuse.
38:10 Paul Matzko: I suppose I should say I have a certain degree of built‐in caution or skepticism. Some of that’s the concern I… It makes perfect sense that national regulations are cleaner, and neater, and more convenient for infrastructure development, at least with a relatively light touch FCC that we currently have. But it does raise concerns to me about overriding localism. There’s like a federalist kind of question here.
38:41 Roslyn Layton: Sure. Well, yeah. So let me say this, this is a case where you have to be careful because one area, as a nation, where we have looked at the need for federalism is communication policy. These are laws that are very clear from our Telecommunications Act in 1996. And if you don’t like those laws, well, we can update that. I would offer updating that act, but that has not been something that… Republicans have been trying to do that now for five years, and have not had any cooperation, but we really need to update that Communications Act. But for the moment, that’s what we have, that’s what the American people, we agreed to, in Congress. It’s been extremely successful to give us the other generations of mobile wireless that we enjoy. And so the FCC is just applying that to this next generation, and they have been extremely careful to stay within the boundaries.
39:39 Roslyn Layton: That was the big critique about the prior FCC; they kept pushing and exceeding the boundaries of their authority. And this FCC is very clear to be within the boundaries, to interpret the statute, as it’s written, don’t over‐interpret it. But what I’d say is, communications policy is one area where, as a nation, over the last century, we said there’s a value to having, everybody having a telephone, or everybody having access to the Internet or what have you. So this is just in that vein. And especially when everybody says they want more competition, you’re not gonna get more competition unless you allow the provider to come into your community. Whether it’s by wire or wireless or satellite or whatever, you have to let the network be built, otherwise you’re not gonna get more competition.
40:26 Paul Matzko: It reminds me that we’re not operating from a state of nature here, that we have this whole set of institutions and systems that constrain the kind of ideal telecommunications system that we want. For example, well, we have this network of municipal utility monopolies, right? There’s phone poles all over the country.
40:54 Roslyn Layton: Right. Sure. Sure.
40:55 Paul Matzko: Now, in an ideal world, that wouldn’t have been… We might not have constructed our energy and water and sewer grids in that way.
41:02 Roslyn Layton: Of course.
41:02 Paul Matzko: But that’s what we did and so we’re confronted with that. We’re not dealing with a kind of free market for our energy grid and whatnot.
41:09 Roslyn Layton: Right. Right.
41:10 Paul Matzko: So we have to deal with this already kind of distorted system the best we can. So we can’t let the best be the enemy of the better, I suppose here. And I think the…
41:21 Roslyn Layton: Correct. Yeah. And by the way, this spectrum, as well, as I said, we have more capability… One of the most important things has been to try to recover more spectrum and getting other kinds of providers to buy spectrum. That’s also really important. That it’s the supply, that we get more supply in the marketplace. And we can argue that the history around spectrum was constrained, that limited the number of players, the same way with franchises. If you were a cable company, in order to get permission, you made a deal with the local provider, you had to provide coverage to everyone. And now people forget that those deals were made and that was what the community agreed.
42:00 Roslyn Layton: And now they don’t like that anymore, because then they’ll say, “Oh, well, we’ll take public money and compete outside.” There’s always been past decisions that have consequences for the future, and that’s one of the challenges that we work with, but technology is amazing because now we’re finding out, hey, we can overcome the past monopoly or legacy with the new technology, we just override it, we find out a new way to do it.
42:29 Paul Matzko: That’s a good lesson, I think, for us to end on. I thank you, Rosalyn, so much for coming on. I appreciate your time. And for our listeners, until next week, be well.
42:41 Paul Matzko: Building Tomorrow is produced by Tess Terrible. If you enjoy our show, please rate, review, and subscribe to us on iTunes, or wherever you get your podcasts. To learn about Building Tomorrow, or to discover other great podcasts, visit us on the web libertarianism.org.