White House sets up committee to assess foreign participation in US telco

President Donald Trump issued an executive order to establish a new committee to provide recommendations to FCC  regarding foreign applications for telecom licences in the US.

The formally titled “Executive Order on Establishing the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector” was issued by the president on Saturday, with a primary objective to ‘assist the FCC in its public interest review of national security and law enforcement concerns that may be raised by foreign participation in the United States telecommunications services sector’.

The committee will be chaired by the Attorney General (William Barr as the current job holder) and members will include the Secretary of Defense, the Secretary of Homeland Security, and heads of other executive departments or agencies, and Assistants to the President which the President sees appropriate. Advisors to the committee will include a dozen secretaries and heads of relevant departments and agencies, for example the State Department, Treasury, Commerce, National Intelligence, Office of Science and Technology Policy, as well as the President’s assistants for National Security Affairs and Economic Policy.

The committee’s working relation with the FCC will go two-ways. The FCC can refer applications for licences or transfers of licences to the committee for review. The committee will ‘review applications and licenses for risks to national security and law enforcement interests posed by such applications or licenses’, and will be authorised to collect information on applicants needed for the reviews. Based on such risk reviews, the committee shall recommend to the FCC whether it should dismiss or deny applications, set condition on or modify the granting of licences, or even revoke licenses already granted.

“I applaud the President for formalizing Team Telecom review and establishing a process that will allow the Executive Branch to provide its expert input to the FCC in a timely manner,” said FCC Commissioner Ajit Pai. “Now that this Executive Order has been issued, the FCC will move forward to conclude our own pending rulemaking on reform of the foreign ownership review process.”

Citing the FCC’s decision to reject an application from China Mobile to offer international telephony service last year, Pai said “this FCC will not hesitate to act to protect our networks from foreign threats. At the same time, we welcome beneficial investment in our networks and believe that this Executive Order will allow us to process such applications more quickly.”

Some of America’s biggest telecom companies are of foreign ownership. The newly formed New T-Mobile, the merger between T-Mobile and Sprint, is a subsidiary of Deutsche Telekom, with the German parent company being the biggest share-holder (43% of total share), and its second largest shareholder is Japan-based Softbank (23%). Vodafone used to own 45% of Verizon Wireless until 2014. But these naturally fall under the “beneficial investment” category. It will be applications like the one filed by China Mobile that will get most of the committee’s attention.

US heads towards C-Band but critics create risk of legal action

The FCC has proposed new actions which would finally make valuable mid-band spectrum available to telcos, but it is not without opponents.

For five years the FCC has been attempting to figure out how it can free-up the C-Band spectrum airwaves, and now it seems to have finally made some progress. FCC Chairman Ajit Pai announced the country’s largest ever spectrum auction, with 22,000 country-wide licences available in the 3.55-3.65 GHz, though the US will have to swallow a $14.7 billion bill for satellite companies to vacate the space. This is the issue for some.

“Shelling out billions for airwaves we already own is no way to handle taxpayer money – especially when taxpayers want those dollars to support rural broadband,” said Senator John Kennedy of Louisiana.

“People say appetites grow by indulgence, and it’s true: These foreign satellite firms want all four feet and their snout in the taxpayer trough. The FCC shouldn’t be helping them.”

Intelsat, SES, Eutelsat, Telesat and Embratel Star One have all demonstrated to the FCC they have commercial activities in the C-Band airwaves which would be negatively impacted by the proposals. Licences will expire towards the end of the decade, though the FCC has said it would make funds available to accelerate the process of vacating these valuable airwaves.

Senator Kennedy seemingly believes the satellite operators can be kicked off the airwaves at the drop of a hat as they are leaseholders of the assets not owners. The statement generally ignores well established commercial practices, though this is a man in an influential position.

The US Senate Committee on Appropriations regulates expenditures of money by the government. The FCC is under the jurisdiction of the Financial Services and General Government subcommittee, of which Senator Kennedy is the Chairperson. If Senator Kennedy wants to throw a spanner into the auction mechanism, he certainly has the power to do so.

And despite the financial reward for relocated out of the C-Band airwaves, not all the satellite companies are happy with the situation.

“This Order is fatally flawed by its misinterpretations of the Communications Act, and by its numerous arbitrary and capricious conclusions,” said ABS CEO Jim Frownfelter. “The Small Satellite Operators (SSOs) are going to be harmed by the unlawful revocation of the right to use 60% of their licensed C-band spectrum, and we will ask the courts to overturn this Order and to instruct the FCC to start the entire process again.”

ABS is a global satellite operator, offering broadcasting, data and telecommunication services, through a fleet of satellites operating in the C-Band airwaves. The Small Satellite Operators (SSO) is a lobby group representing ABC alongside Hispasat and Embratel Star One, plan on launching legal action to halt the auction process.

What is developing is a very complicated situation. The C-Band airwaves are key to the efficient deployment of 5G services, though thanks to congestion, they are not immediately available to US telcos.

Almost everywhere else around the world, mid-band spectrum is forming the foundation of the drive towards 5G. The spectrum marries a palatable balance between high-speed data downloads and extended coverage, hence the popularity in the absence of network densification projects. With a reliance on high-band spectrum in the US, delivering the promised experience of 5G might be very difficult and expensive.

The proposals put forward by the FCC, a dynamic spectrum sharing policy, is a very interesting one. A three-tier hierarchy will be created to offer the US Navy primary use over the airwaves, though the vast majority of the time, second and third tier licence owners will make use. This is an interesting approach and could offer regulators around the world confidence to take a new approach to spectrum management, though the threat of legal complications in the Senate and courts paint a gloomy picture.

Arm shakes up the IP game

Arm has announced the launch of its flexible licensing model to allow customers to access to its IP without breaking their bank accounts.

It’s a model which has the potential to shift traditional dynamics in the segment as Arm aims to shift its customer base outside its traditional mobile market. With the connected era promising a ridiculous number of devices there are riches available for those who can prove their IP is suitable for this varied plethora. This seems to be the strategy in mind.

In short, customers pay a ‘modest’ fee upfront and then negotiate contracts when the team is moving towards production phase.

“By converging unlimited design access with no up-front licensing commitment, we are empowering existing partners and new market players to address new growth opportunities in IoT, machine learning, self-driving cars and 5G,” said Rene Haas, President of the Intellectual Property Group at Arm.

As it stands, Arm works like many other IP businesses. Customers pay the full-amount for access to licences and agree royalty payments, depending on the potential scale of the devices, upfront. Although this is the traditional way in which business is conducted, it is risky as it is an expenditure irrelevant as to whether the Arm IP is used in production or not.

The Arm Flexible Access model effectively delays payment. SoC design teams will be able to engage Arm and its IP before any licences or royalty payments are agreed. In short, customers will only pay for what they use when they get to production, paying only a trial fee at the beginning of the process.

Arm has said the Flexible Access portfolio includes all the essential Intellectual Property (IP) and tools needed for an SoC design. Prototypes can be designed and evaluated in numerous ways before any significant financial commitments are made. Theoretically, it should offer customers more opportunity to experiment without the fear of irreversibly-expensive mistakes or assumptions.

There are now three ways to work with Arm:

Arm DesignStart Arm Flexible Access Standard Licensing
Cost $0 for Cortex-M0, M1 and M3$75k for Cortex-A5 $75k entry package annual access fee$200k standard package annual access fee Upfront license fees based on license terms
Licensing Simple license agreement for DesignStart Pro Sign one-time access and manufacturing agreements Agreement terms vary to cover single or multiple uses
Support Community-based support Standard support and maintenance for all included products Standard support and maintenance for licensed products
Portfolio Click here Click here Access to the most advanced Arm IPLocked-down system-on-chip (SoC) roadmaps with multiple uses of specific Arm IP products

“We are working on several products to address AI use cases in automotive, IoT gateways and edge computing,” said Nagendra Nagaraja, CEO of AlphaICs, an AI start-up. “For this, we need access to a wide range of IP and the ability to rapidly evaluate, prototype and design. Arm’s Flexible Access model gives us that agile approach to IP for the first time.”

This is where the model can be incredibly beneficial for both the ecosystem and Arm. Companies like AlphaICs would have struggled financially to scale under the traditional IP model, it is a 50-strong start-up exploring an embryonic segment of the technology industry. In paying a modest amount up-front, AlphaICs has the opportunity to prove the business case before making any significant financial commitments.

This approach obviously helps the start-ups who are exploring unproven ideas, but it also gains Arm traction in currently unprofitable segments which could scale extraordinarily quickly. AlphaICs is aiming to create the next-generation of AI compute for autonomous edge and data centre applications, not a traditional stomping ground of Arm, but there are certainly growth opportunities.

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.