FCC is likely to deny China Mobile’s licence application

Ajit Pai, Chairman of FCC, has called on his colleagues to vote against granting a licence to China Mobile, citing national security concerns.

In a public statement tilted “FCC Chairman Opposes China Mobile’s Telecom Services Application”, Pai said that he believed, after reviewing the relevant evidence, “China Mobile’s application to provide telecommunications services in our country raises substantial and serious national security and law enforcement risks.  Therefore, I do not believe that approving it would be in the public interest.” He went on to request the Commission team to “join me in voting to reject China Mobile’s application.”

This should not come as any surprise. One piece that stood out among the “input provided by other federal agencies” Pai referred to in his statement already set the tone. It was a brief statement issued by David J. Redl, Assistant Secretary for Communications and Information, U.S. Department of Commerce. “After significant engagement with China Mobile, concerns about increased risks to U.S. law enforcement and national security interests were unable to be resolved. Therefore, the Executive Branch of the U.S. government, through the National Telecommunications and Information Administration pursuant to its statutory responsibility to coordinate the presentation of views of the Executive Branch to the FCC, recommends that the FCC deny China Mobile’s Section 214 license request.” The statement was released through the National Telecommunications and Information Administration (NTIA), a part of the Department of Commerce.

China Mobile Limited, the world’s largest mobile operator by subscriber numbers, is partially listed (27.28%) on the Hong Kong Stock Exchange. The Chinese government, through the parent company China Mobile Communications Group Co., Ltd., controls the rest of the company. Its US subsidiary, China Mobile USA, registered in Delaware, filed an application in 2011 to offer international telephony service between the US and other countries. But it had remained dormant until it was reviewed by the Trump administration last year.

China Mobile would have to operate as a virtual network anyway as it lacks the infrastructure. That worries the US officials that the operator, ultimately the Chinese government, would be able to exploit the American telecommunication networks for intelligence gathering purposes, therefore compromise the security of the government and the public. “There is a significant risk that the Chinese government would use the grant of authority to China Mobile USA to conduct activities that would seriously jeopardize the national security and law enforcement interests of the United States,” an FCC official told the reporters, quoted by Reuters.

The vote by the FCC Commissioners will take place at the May 2019 Open Commission Meeting to be held on 9 May. The result will likely go Pai’s way if the commissioners vote along party line. Three out of the five commission seats are occupied by Republicans, as is Pai himself.

FCC modifies frequency policy to encourage 5G investment

Changes to licence regulations on 3.5 Ghz have been approved by the FCC in an effort to encourage the 5G rollout.

The 150 MHz wide spectrum on the 3.5 GHz (3550MHz to 3700MHz.) band, or Citizens Broadband Radio Service (CBRS), is very busy. Following the rules of the FCC established in 2015, three tiers of users are sharing this band. There are the Incumbent Access Users, in particular the US Navy Radar Operators; the Priority Access Licenses (PALs) which are mainly commercial users like the telcos; and dinally, General Authorized Access (GAA) users which are permitted to use any portion of the 150 MHz frequency so long as it has not been granted to the other two tiers.

FCC Commissioner Michael O’Rielly, who was tasked to lead the review of current regulations and deliberation of new policies with special focus on PALs, claimed the old rules “would not support large-scale deployments, such as mobile or 5G networks… The rules in place favored small-scale, fixed networks, by making it unattractive for any other type of deployment. Basically, the rules were designed so that a select group could get licenses on the cheap.”

The Report and Order published by the FCC on Tuesday October 23 has kept the three tiers in place, but has made modifications to the specific implementations, including:

  • Changes the size of PAL license areas from census tracts to counties;
  • Extends the PAL license term to ten years and makes these licenses renewable;
  • Establishes end-of-term performance requirements;
  • Ensures seven PALs are available in each license area;
  • Allows the use of bidding credits for rural and Tribal entities;
  • Permits partitioning and disaggregation of PALs;
  • Updates information security requirements to protect registration information; and
  • Facilitates transmission over wider channels while maintaining protections for other services

In addition to extending the license term from three years to ten years and changing it from unrenewable to renewable, the new rules also did away with the limitations on the number of PALs a single applicant can have in one licence area (currently capped at four) and the bandwidth a PAL can use (currently limited to 10 MHz).

Ajit Pai, Chairman of FCC, admitted there has been debate on the new size of PAL licence, with different entrenched interest either arguing for maintaining the current census tract-sized licence, or demanding vastly enlarged areas. He had to cite support from Rural Wireless Association and Competitive Carrier Association, which represents smaller carriers, to defend the Commission’s  decision to opt for county-size license.

“We find that county-based licenses are just right,” said Pai. “This compromise will allow most interested parties, large and small, to bid on 3.5 GHz spectrum in order to provide 5G services. License sizes aside, we make other necessary changes today to promote investment and innovation in the 3.5 GHz band, including extending the license terms and giving an expectancy of license renewal.”

Pai also reassured the GAA users that “even after PALs are granted, General Authorized Access users can provide service in the PAL spectrum until licensees deploy. Taken together, these reforms will help make this band a sandbox for 5G and represent another aspect of our comprehensive 5G FAST plan to secure American leadership in the next generation of wireless connectivity.”

The rule modifications might not look revolutionary, but they should prove positive for more aggressive 5G rollout in the US. With the extended licence term and the possibility of renewal the new regulations provide more confidence to investors looking at long term. Meanwhile, it also strikes a balance both to encourage scale and to protect operators with local ambitions only.