The Carriers’ Carrier Option for 5G Wireless

            You might have heard about a National Security Council initiative identifying the security and public safety benefits in having a government owned fifth generation wireless network leased by commercial ventures. See https://www.wsj.com/articles/u-s-memo-urges-big-push-on-5g-wireless-technology-1517200319; http://wreg.com/2018/01/29/axios-white-house-considering-nationalizing-5g-mobile-network/.

            While quickly rejected as unnecessarily intrusive of marketplace forces, the document does raise questions about whether and how shared infrastructure investment might make sense.  Even ardent libertarians might not reject the pooling of resources where a faster, more efficient and cheaper output occurs.  For example, AT&T won a competitive tender to build a nationwide, First Responder Network available for shared access by state and local public safety departments with AT&T able to exploit unused spectrum for commercial services.  See https://www.firstnet.gov/. Few would consider this socialism, a usurpation of the commercial marketplace and government mission creep.

            The First Responder network provides a case study in how pooled resources can expedite the availability of leading edge technology that can largely solve access, affordability and network compatibility issues.  The 911 disaster highlighted how various first responders could not communicate with each other, even at short distances, because of different frequencies and equipment types.  Arguably, similar benefits could accrue with government expediting the installation of a 5G network, particularly in rural areas not likely to see speedy deployment in light of the expense in building small towers with compressed signal contours.  Because of the fungible nature of transmission and switching capacity, commercial ventures still could differentiate their services and maintain a competitive marketplace.

            Nevertheless, I too have concerns about government ownership, particularly when the motivation appears more about foreclosing foreign snooping and facilitating domestic surveillance options.  Additionally, the First Responder Network does not provide an air tight case for 5G network sharing, because most public safety networks fit within the ambit of what governments provide while the commercial marketplace has largely functioned without much government involvement for mobile telecommunications and Internet access.

            The NSC initiative does suggest that infrastructure sharing can make sense in some cases.  Another way to think about sharing is to separate one element in a bundle of service functions leaving the remainder still within the ambit of the commercial marketplace.  Perhaps surprisingly, telecommunications ventures throughout the world have executed this model.  It’s often called “Carriers’ Carrier” and it has provided a platform for both cost savings and removal of the potential for anticompetitive behavior.  For example, the United Kingdom government ordered British Telecom to divide itself into a basic local exchange carrier and a venture able to pursue any and all other markets.  The local carrier operates as a Carriers’ Carrier offering first and last kilometer access to every venture, including British Telecom, on fair and nondiscriminatory terms and conditions.  I readily acknowledge that there are other examples where a carrier intermediary adds little value and raises the cost of capacity.

            The recent 5G proposal triggered an immediate and indignant response ensuring no consideration of even promising Carriers’ Carrier options.