A bit of background
The deployment of the new 5G network presents a unique challenge to our regulatory system. Far from the 100-foot lattice towers and monopoles of 3G and 4G past, 5G capability will largely be the task of small cell deployments in the public streets, with antennas often no larger than a backpack. Yet, while 5G utilizes a smaller form factor than its predecessors, it remains bound by the same rules and regulations at the federal, state, and local level. Unsurprisingly, this newer, more nimble, generation of technology faces significant barriers, largely in the form of delays in permit processing, excessive permit fees, and burdensome local ordinances.
To those in the industry, the story is all too familiar. Congress enacted the Telecommunications Act of 1996 (known colloquially as the Telecom Act) to deregulate telecommunications, open the market to competition and foster the rapid deployment of new communications technologies. Among other things Congress sought to preclude local governmental actions that could lead to a “prohibition of [telecommunications]service,” (sections 253 and 332(c)(7)) and ordered local governments to act on permits to install telecommunications equipment within a “reasonable period of time” (section 332(c)(7)). But the breakneck pace of the evolution of communications technologies has far exceeded what any lawmaker could have envisioned in 1996.
Even in its fledgling years, Justice Antonin Scalia observed that ”it would be gross understatement to say that the 1996 act is not a model of clarity.” In light of the almost existential changes in telecommunications that have occurred since then, much of the language of the Telecom Act now seems to border on Delphic. It has been up to the courts divine precisely what Congress meant when it used such abstruse phases as “prohibition of service” or “reasonable period of time,” and even with the mandate to the Judicial Branch to hear cases on an expedited basis, the wheels of litigation grind too slowly to keep pace with technology.
Lately, the industry has looked to the White House for a more agile response. In an order dated September 27, 2018, the Federal Communications Commission (“FCC”), the federal regulatory agency charged with regulating the deployment of such small wireless facilities under the Telecom Act, picked up on an Obama-era FCC rulemaking and acknowledged that local barriers have created significant delays to deployments. The new rule takes a strong stance to limit them. In this article, we briefly discuss the regulatory landscape, the highlights of the FCC’s new order and its potential implications, as well as the status of ongoing challenges to it.
The regulatory landscape: Federal, state and local government
The nation’s telecommunications network touches on all levels of the federalist system of government. At the top, is the FCC. Pursuant to a fairly broad congressional delegation of authority, the FCC has exercised broad interpretive authority to clarify what Congress meant when it issued its proscription of local actions that result in a “prohibition on service” under the Telecom Act. Under a 2009 declaratory ruling the FCC had already exercised its rulemaking authority to create “shot clocks,” which replace the nebulous “reasonable period of time” mandate with bright-lined deadlines on local governments to process permit applications.
State government also play an important role in the statutory landscape. As one example, in California, the state legislature adopted Assembly Bill 57 to expand on the FCC’s Shot Clock rule. Under AB 57, a local government’s failure to act on a permit application within the Shot Clock timeframes may result in the applications being “deemed approved,” thereby supplanting the normally sacrosanct zoning authority of local government to issue the final say on whether such permits should be approved or denied.
The broad economic impacts of delay at the local level
But it is at the local level where the rubber hits the road. City and county governments have ultimate control over what happens in their streets and, generally, have plenary zoning powers. In many cases, municipalities have invoked their zoning authority — their “police powers” — to determine whether a telecommunications permit should or should not be granted.
It is here where the FCC focused its efforts, since the urgencies of connecting the nation’s 224 million smart phone users frequently collides with the deliberative pacing inherent in determining the zoning implications of a land use application. As noted above, sources of delay include everything from permit denials to exorbitant fees to onerous conditions placed on the approvals. The problem often is exacerbated by local suspicions about the health effects of telecommunications facilities and, because “all politics is local,” the reasons for delaying decisions on applications often is motivated by a desire to appease a restive constituency charged with voting the next city council into office. Such hurdles are particularly problematic in the deployment of 5G infrastructure because of its broad economic impacts on a national, and even global, scale.
Under the new FCC rule, avoiding delay is critical as “speeding 5G infrastructure deployment by even one year would unleash an additional $100 billion to the U.S. economy.” Moreover, “[i]t is estimated that wireless providers will invest $275 billion over the next decade in next-generation wireless infrastructure deployments, which should generate an expected three million new jobs and boost our nation’s GDP by half a trillion dollars.” Aside from the economic benefits, rapid deployment of 5G will support important advances in other arenas as well, including technology, healthcare, and the Internet of Things (“IoT”). Indeed, winning the race to 4G added $100 billion to our gross domestic product. It also led to $125 billion in revenue for U.S. companies that could have gone abroad, grew wireless jobs in the U.S. by 84 percent, and our world-leading 4G networks now support a $950 billion app economy.
The FCC’s new world order
In its recent order, the FCC declared a new world order with respect to defining when regulatory and legal requirements imposed by a locality constitute an effective prohibition that violates sections 253 and 332(c)(7) of the Telecom Act. Operating within the sweet spot of its delegation of authority, the FCC spared no detail with respect to fees and aesthetic requirements.
With respect to fees, the FCC declared that all fees placed on the processing of approvals for small wireless facilities must meet three basic requirements: (1) the fees must be a reasonable approximation of actual costs; (2) the actual costs must, themselves, be objectively reasonable; and (3) the fees must be no higher than those charged to others in similar situations, i.e., they must be non-discriminatory. Importantly, the FCC set a quantified “safe harbor” for fees. Specifically, the FCC set fees based on reliable data of actual costs, at (1) $500 for non-recurring fees, including a single up-front application that includes up to five small wireless facilities, with an additional $100 for each small wireless facility beyond five, or $1,000 for non-recurring fees for a new pole (i.e., not a collocation) intended to support one or more small wireless facilities; and (2) $270 per small wireless facility per year for all recurring fees, including any possible right of way access fee or fee for attachment to municipally-owned structures in the right of way.
In the area of aesthetics, providers often had to prove they presented the “least intrusive means” to fill a “significant gap in service.” Such a standard often resulted in municipal inquiries into areas traditionally left to the FCC, such as the provider’s radio frequency coverage objectives and whether or not a facility was really necessary to provide service. Now the aesthetics litmus test is the same that applies to fees: “that a state or local legal requirement constitutes a prohibition if it ‘materially limits or inhibits the ability of any competitor or potential competitor to compete in a fair and balanced legal and regulatory environment.’”
Accordingly, under the new rule, “significant gap” and “least intrusive means” no longer qualify as valid areas of municipal inquiry. Instead, local aesthetic requirements may be subject to preemption unless they are reasonable and technically feasible, and no more burdensome than the kinds of aesthetic requirements applied to other infrastructure deployments in the public rights-of-way. Aesthetic standards must also be “clearly defined and ascertainable,” and published in advance; local governments can no longer impose aesthetic standards that leave providers wondering about which design will pass muster with the community and the local permitting authority.
Closing the shot clock gap
As noted above, the FCC first established the Shot Clocks in 2009, setting the “reasonable time frame” to process approvals as 90 days for collocations on preexisting structures and 150 days for new facilities. Following the 2009 Shot Clock ruling, issues arose related to when the Shot Clock began to accrue and when, if ever, it was to be paused to address incomplete applications. In 2014, the FCC clarified its ruling by establishing that the Shot Clock began to run when the applications were first submitted—not when they were “deemed complete” by the local government. The 2014 order also expanded on requirements for tolling the Shot Clock, setting limits on when and how an application must be “determined incomplete” in order for a locality to be able to toll the clock.
In its most recent order, the FCC further refines the prior Shot Clock rulings and shortens the time frame, from 150 to 90 days for new facilities, and from 90 to 60 days for collocations. It also altered the remedy for violating the Shot Clock. Although it did not go so far as to provide for a “deemed approved” remedy — as California did with AB 57 — failure to act within the Shot Clock timeframe now amounts to a presumptive prohibition of service in violation of the Telecom Act.
Local government responds
Not surprisingly, local governments have not been exactly enthusiastic about the FCC’s new order, particularly with regard to fees, as many localities have used the permitting process as an opportunity to generate critical revenue to fund the application review process. Following its publication, numerous localities submitted petitions for review of the FCC order in the First, Second, Ninth, and Tenth Circuit Courts of Appeals, alleging that the FCC had overstepped its bounds. While the new rule is slated to become effective on January 14, 2019, it will be subject to consolidated review in the Tenth Circuit. In the meantime, the industry is poised to avail itself of the new regulatory regime to deliver on the promises of 5G.
Michael W. Shonafelt is a partner at Newmeyer & Dillion in the Newport Beach office. In addition to advising clients on all zoning and land use matters, he assists in the deployment of cell sites and distributed antenna systems throughout the nation. You can reach Michael at michael.shonafelt@ndlf.com.
Stephanie Telavera is an associate at Newmeyer & Dillion in the Newport Beach office. She focuses her practice in land use, wireless communications and environmental law. You can reach Stephanie at stephanie.telavera@ndlf.com.
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