FCC Gives Telecoms $3 Billion In Annual Corporate Welfare

FCC Gives Telecoms $3 Billion In Annual Corporate Welfare

Reprinted with permission from DCReport.

The Trump administration, which proposed tripling housing costs for low-income renters, is slashing by 90% or more the utility pole rents paid to local governments by Verizon, AT&T and other cell phone providers. The rent cut for these corporations is worth about $3 billion annually, the National League of Cities estimates.

Utility pole rents will be capped at $270 per pole each year by new Federal Communications Commission rules.

Rents per utility pole are typically $2,400 a year, nine times the FCC cap, said Tony Batalla, IT manager for the city of San Leandro, Calif., a city of 89,000 people across the bay from San Francisco. “These are negotiated rates the companies agreed to,” he noted.

The FCC also imposed a 30-day deadline on every municipality in America to comply, even though the law in many states legally impossible for many cities to change their municipal codes in less than 45 days because of rules requiring public hearings before a new ordinance can be adopted.

“This may become a full employment act for lawyers,” said Angelina Panettieri, principal associate for information, technology and communications for the National League of Cities. The new rules may also prompt many cities with tight budgets to just roll over and give the cellular telephone companies whatever they demand rather than spend taxpayer funds on litigation.

Charging any rent will require extensive and expensive documentation by local governments under the new FCC rule, which was published Sept. 14 and takes effect Oct. 15.

Under the new rules, other hardships will be imposed on municipal governments that negotiate like-kind service arrangements. For example in return for using existing municipal conduits cities may negotiate more service in poor neighborhoods, where profits are smaller because fewer people buy add-ons to their cell phone services such as data, texts and voicemail.

Many cities negotiate utility pole rents with discounts as more poles are rented in order to encourage better service in poor neighborhoods, narrowing the digital access divide.

For example, some of the many hundreds of strands making up a single fiber optic cable may be dedicated to municipal use, which holds down taxpayer costs and avoids duplication.

“Those in-kind arrangements are threatened under the FCC rules,” Batalla said. “In fact, [our] understanding is like-kind swaps are off the table.”

In contrast to this $3 billion annual Trump administration favor for Verizon, AT&T, Sprint and T-Mobile, consider its proposed rent increases for the poorest of the poor.

Legislation backed by the Trump administration would raise rents paid by four million disabled, elderly and impoverished households with federal rental assistance. The $800 per year average rent hike would increase their burdens by $3.2 billion, about the same amount as the cell companies stand to save.

A single mother with only $250 a month of cash income would see her monthly housing cost triple to $150 a month, leaving her with just $100 in cash for expenses like clothing and diapers, I show in the paperback edition of my book “It’s Even Worse Than You Think: What the Trump Administration Is Doing to America.”

Subsidizing rents for poor people creates “perverse incentives” that discourage self-sufficiency, Ben Carson, the wealthy pediatric neurosurgeon who is secretary of Housing and Urban Development, said in June. The rent proposal “is our attempt to give poor people a way out of poverty,” Carson told Fox News. The plan is now on the back burner, but it could move forward at any time.

Slashing rents for profit-making companies at the expense of local taxpayers is clearly perverse. But with Ajit Pai, a former Verizon lawyer, chairing the FCC, the agency has all but abandoned any pretense of balancing the interests of customers and telecom companies. The FCC is often cited in economics and regulatory academic papers as an example of what is known as “regulatory capture” in which the agency serves the companies under its aegis rather than regulating them in the public interest. Pai has taken this pro-industry bias to a much higher plane.

Significantly, the $270 annual rent cap is a form of rate-making, in which the FCC and state utility boards set the rates that companies charge customers. The FCC has for years been moving away from rate regulation until Trump. The current administration has moved to subtle side door rate regulations like the far below market utility pole rent cap.

Mayor Pauline Russo Cutter of San Leandro said that before the FCC rule the city used rents to provide one-gigabyte internet service to the public schools, much faster than most homeowners have.

Why, she asked the FCC in a letter, is it reversing course on rate regulation?

The answer is in the coming next wave of mobile communications devices called 5G. It is about 20 times faster than the fastest existing 4G LTE wireless technology. For many people, 5G may be suitable as a substitute for coaxial cable or fiber optic to the home and many small businesses. The first 5G devices and services are expected in 2019.

But the new 5G standard comes with a catch. It requires that many more towers, called minitowers because they can be mounted on utility poles. These minitowers will be spaced as little as 300 feet apart.

Many more minitowers would have brought more revenue to local governments, which until the new rule negotiated utility pole rental rates with the cell phone providers. Many cities, like San Jose, in the heart of Silicon Valley, use revenue from these negotiated rental rates to enhance service in poor neighborhoods. That reduces the digital access divide between prosperous neighborhoods and those where the wireless companies have little interest in investing because profits will be meager.

But the FCC’s tight timeline appears to be a calculated plan by Trump’s FCC appointees to make cities roll over and do what Verizon, AT&T, T-Mobile and Sprint want or face huge legal bills for not complying with the new rules.

It’s the latest example of how Trump promised voters he would be the champion of the “forgotten man,” but who forgot that promise as soon as he took the oath of office and instead is using his office to help big business. By interfering with negotiated agreements between cities and cell companies, the Trump administration is contradicting longstanding Republican arguments that government power should move away from Washington and toward states and local governments. It is also contradicting Trump’s inaugural address promise: “We are transferring power from Washington, D.C. and giving it back to you, the American People.”



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