A Tale of Two 5G Cities: San Jose and Indianapolis

A Tale of Two 5G Cities: San Jose and Indianapolis

San Jose, California and Indianapolis, Indiana, are examples of the polar opposite results that can emerge depending on how you tax something.

Indianapolis has cultivated a 5G-friendly culture and will be one of the first major cities to see extensive rollout of the wireless technology of the future. San Jose, on the other hand, saw the equipment needed for 5G as a revenue source and charged such onerous fees that providers have largely ignored the Silicon Valley city.

The implementation of 5G requires what are known as small cells that are about the size of a backpack. These small cells are installed on utility poles, buildings, and other structures, and relay signals over short distances across the network. The technology will require lots of them — perhaps thousands per major city — but it eliminates the need for massive cell towers required for 4G and older technology.

Forward-thinking Indianapolis chose to take a minimalist regulatory route and is charging an annual fee of just $50 per small cell for their installation on the city’s rights-of-way. That has led to more than 1,000 small cells being installed across Indianapolis and the state of Indiana by wireless providers. AT&T and Verizon both announced this summer that Indianapolis will be among the first American cities to get 5G.

That led to praise from Commissioner Brendan Carr of the Federal Communications Commission in September when he visited the Indiana Statehouse to celebrate the state’s passage of 5G-friendly regulations that fall in line with the federal plan to reduce red tape that could inhibit 5G growth. “Not one, but two of the country’s largest wireless providers have announced Indianapolis as a showcase city for 5G, with deployments happening here by year’s end,” Carr said. “That makes Indianapolis — not New York, not San Francisco — that makes Indianapolis number one in the country for the most intensive 5G investment.”

San Jose, on the other hand, is far from number one in 5G investment. The city at the heart of the tech world ought to be among the 5G leaders, but its leadership chose to charge an annual fee of $3,500 per small cell.

As Carr, who is tasked with leading the FCC’s wireless effort, pointed out in a column in The Mercury News, San Jose saw the installation of exactly zero small cells prior to this year.

San Jose Mayor Sam Liccardo tweaked the city’s plan somewhere, charging a $1 million upfront payment with lowered annual fees. That has resulted in the city seeing the installation of a reported 86 small cells, Carr said. However, the seven-figure buy-in will prove an insurmountable barrier to entry for smaller bankrolled providers.

And to prove San Jose hasn’t learned its lesson, it’s suing the FCC for the order it passed last month establishing reasonable fees for 5G services.

Verizon was among the providers who are saying that city regulations over small cells are hindering its ability to deploy 5G. Will Johnson, the company’s senior vice president for federal regulatory and legal affairs, singled out San Jose as a city that is trying to charge fees well beyond the costs it incurs.

He wrote on the company blog:

It takes too long, costs too much, and gives outsized leverage to the localities that control the rights-of-way and have gatekeeping control to much of the infrastructure. The existing process impedes the roll out of services that customers want and imperils our country’s ability to remain in the lead internationally with the transition to 5G.

Roslyn Layton, a Forbes contributor, wrote that Liccardo’s policies are an obstacle to 5G growth:

San Jose is not attractive to any company that wants to support the buildout of the next generation of wireless and digital infrastructure. By trying to shake down providers, he is putting his constituents at the end of the line to receive the next generation of wireless innovation and access.

5G holds the key to smart cities, where the combination of lightning-fast wireless technology and sensors can be used to improve services for residents. But a city can only become smart if it stops being dumb with its regulatory policies first.

Johnny Kampis is investigative reporter for the Taxpayers Protection Alliance Foundation.

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